Good for liquidity management and payment reconciliation, says IBM
IBM has launched a global blockchain payments network that allows financial institutions to use a range of pegged cryptocurrencies as a bridge asset between any two fiat currencies, like the dollar and euro, for near real-time settlement.
Big Blue said the “Blockchain World Wire” is the first blockchain network of its kind to integrate payment messaging, clearing and settlement on a single unified network. The company described it as a new “financial rail”. It already has payment locations in 72 countries, with 47 currencies and 44 banking endpoints, IBM said.
Participating institutions use their existing payment systems – connected via the World Wire’s APIs – to convert the first fiat currency into the digital asset. World Wire then simultaneously converts this into the second fiat currency, completing the transaction. ‘Transaction details are recorded onto an immutable blockchain for clearing.
The system requires participants to agree on a “stable coin” or fiat currency-pegged cryptocurrency. (For those preferring to avoid the use of digital currencies, IBM also provides “alternative settlement methods”, it says.) It is based on the open source blockchain Stellar protocol, which uses neither “Proof of Work” nor “Proof of Stake” but rather a mechanism called “Byzantine Agreement” to ensure consensus.
IBM Blockchain World Wire
“We’ve created a new type of payment network designed to accelerate remittances and transform cross-border payments to facilitate the movement of money in countries that need it most,” said Marie Wieck, General Manager, IBM Blockchain.
IBM Blockchain World Wire makes money transfers point-to-point in lieu of the complexities of conventional correspondent banking.
“It reduces intermediaries and allows users to accelerate settlement time often in seconds by transmitting monetary value in the form of digital assets… this simplified approach improves operational efficiency and liquidity management, streamlining payment reconciliation and reducing overall transaction costs.”
The network already supports settlement using Stellar Lumens and a S. dollar stable coin through IBM’s previously-announced collaboration with Stronghold.
Pending regulatory approvals and other reviews, six international banks, including Banco Bradesco, Bank Busan, and Rizal Commercial Banking Corporation (RCBC), have signed letters of intent to issue their own stable coins on World Wire, adding Euro, Indonesian Rupiah, Philippine Peso, Korean Won and Brazilian Real stable coins to the network. IBM will continue to expand the ecosystem of settlement assets based on client demand, the company said.
The launch comes four months after IBM teamed up with foreign exchange settlement firm CLS to take a Hyperledger Fabric-based system live that is intended to optimise intraday liquidity, improve operational efficiency, and reduce settlement risk. Goldman Sachs and Morgan Stanley among its initial eight users. Today’s launch would, if expanded, position IBM as a platform provider at the centre of a major new settlement network in a potentially lucrative development for the company.