The Crypto space is increasingly getting flooded with stable coins being launched by big techs like IBM (Stronghold USD) or Big banks like JPMorgan in the U.S (JPM Coin) & Japan’s financial giant Mizuho Financial Group (J-Coin). The digital transformation ushered in by the DLT/Crypto movement has made these incumbents realize that they need to be innovative and fight the adoption of the decentralized model to keep their client base & income streams intact and growing or be left in the dust. How successful will they be is a topic for another day. While the fiat pegging brings the much-needed stability to the value of these stable coins, they have still not proved as successful as the decentralized digital currencies. The one area where we see a real world use case & liking for stable coins is the cross border payment systems, as volatility is not desired.
Quite a few central banks have either launched pilot projects in this regard or exploring this option. The most successful cross border payment platform, by far has been RippleNet with its enterprise level software solution called xCurrent & its native token XRP. With more than 200 financial institutions on board (including major players like MUFJ Financial Group Inc. & Standard Chartered Plc), RippleNet has got a head start on the rest of the bunch. The next one that comes close to the adoption is IBM’s Blockchain World Wire (BWW) – a collaborative project between the crypto platform Stellar (XLM) & the former, which uses its native stable coin Stronghold USD as an intermediary digital asset. Stellar Lumens is No. 7 digital coin by market cap and has received a lot of attention with a couple of major events that took place within the last week or so.
The first of these and the more significant one was IBM’s cross border settlement platform (BWW) going live on March 8 – BWW uses the open sourced & decentralized Stellar protocol. As of March 18, the platform is available for implementation in the broader financial markets. The platform originally uses the native Lumens token & a US-pegged stable coin Stronghold USD, but the functionality of the cross border payment system would enable financial institutions to issue their own fiat-backed stable coins. Banco Bradesco, Bank Busan, and Rizal Commercial Banking Corporation (RCBC) & three banks to be named later have shown interest in adding Euro, Indonesian Rupiah, Philippine Peso, Korean Won and Brazilian Real pegged stable coins to the network. Aiming at a rapid global expansion the IBM’s BWW enabled point-to-point payment locations in 72 countries, with 47 currencies and 44 banking endpoints on the occasion.
Speaking at the event Marie Wieck, General Manager, IBM Blockchain outlined the working of BWW in the following words:
“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, By creating a network where financial institutions support multiple digital assets, we expect to spur innovation and improve financial inclusion worldwide.”
The IBM-Stellar alliance which started working on the project in October 2017 has finally entered the arena in a big way. One can argue that Ripple already occupies an important space with RippleNet – a decentralized network of global banks & financial institutions (200+) employing the Interledger Protocol (ILP) to send and receive money. However, BWW has gone one step further by not only providing its proprietary token (XLM) & a stable coin (Stronghold USD) as a cross border mechanism but giving the signing partners the ability to use the platform to issue their own fiat-pegged stable coins. This adds flexibility & added dimension to the platform. No wonder the price of the Lumens token jumped almost 5% (chart below) after this & a listing news that we are going to discuss next.
The second event which gave XLM an added kick was the listing of the digital token on the major U.S digital exchange, Coinbase. This was actually announced a few hours before the official launch of BWW platform. Pure coincidence, good timing or a planned move – whatever it was XLM benefited price wise besides the obvious media coverage it got from these two events. Digital tokens usually benefit from listings on major Crypto exchanges & this was no exception either, but the ‘Coinbase effect’ as they call it is getting muted as more digital tokens start getting listed on the major U.S Crypto exchange. Just as in the case of Ripple (XRP) which was listed on Feb. 25 on Coinbase & soon after on their consumer platform, Stellar (XLM) followed suit on Mar. 13 & Mar. 18 respectively. The two cross border coins seem to be headed for a face off in the near future, trying to steal the initiative from one another.
Still early days for both these platforms – I guess at the end of the day, the one which gains wider acceptance through better usability, flexibility & utility will edge out the other one. Keep in mind though, the cross border payment space is a huge market & with the age-old and tedious system getting phased out, there might be room for multiple solutions – maybe both Ripple & Stellar can collaborate and come out as winners?