IBM Launches Stellar-Based Banking Service, But Bigger Changes Lie Ahead For Global Finance

IBM has officially entered the financial services industry with the launch of Blockchain World Wire (BWW). Using the Stellar blockchain, Big Blue’s platform will enable banks to move large sums of money across borders more quickly, more securely, and for a small fraction of the cost of existing legacy systems. Moving assets across borders is also the core of Ripple’s business model, and other players are expected to soon enter this space. Although there is no debate that distributed ledger technology is well-suited for this purpose, long-term success of these services is far from guaranteed, as the very fabric of blockchain assets may eventually render the very concept of cross border payments obsolete.

The roll out of BWW has been a solid success. Several banks have already announced that they will use the service, and it is already available in seventy-two countries. It has boosted IBM’s reputation as a player in the blockchain space, and Stellar’s market value has jumped.

Crypto advocates have reason to celebrate this development, as it represents the most significant mainstream use of blockchain to-date, and promises to highlight the technology’s remarkable potential. Legacy money transfer players such as SWIFT, Western Union, and Moneygram will no doubt be forced to adapt, or face obsolescence. It is worth noting that Ripple’s similar service, Xrapid, also conducted its first transactions over the past few weeks.

The activation of these transfer services intensifies a much larger debate over the future of blockchain assets, which is whether or not fiat currency can survive the blockchain revolution. Some argue that because cryptocurrency is borderless and decentralized, once it attains mainstream use fiat will no longer be relevant to the global economy. Thus, there will be no need to move money across borders as consumers will merely use cryptocurrency for all their financial needs. Adding to this argument is the assertion that crypto will eliminate the need for traditional banks, as well as financial investment firms.

In fact, blockchain technology has the potential to radically change the very concept of wealth, as traditional assets such as stocks, bonds, or land can be tokenized and used as a medium of exchange. Already platforms such as Polymath and Harbor are working to build such networks. In fact, given the rate of development it is safe to assume that the modern world will soon become dependent on distributed ledgers, much like it has the Internet or wireless communication.

On the other hand, advocates of these transfer services assert that the global economic framework will remain anchored to fiat for the foreseeable future, as central banks provide a level of security that blockchain cannot yet match. For example, Ripple CEO Brad Garlinghouse has long held that the successful movement of cryptocurrencies into common use will require digital assets to work alongside fiat, rather than against it. It is for this reason that using crypto as “bridge currency” between other more traditional assets is critical for adoption.

Regardless of one’s stance on fiat’s future, there is no doubt that the activation of blockchain based cross-border transfers represents a significant step forward for crypto use. It is likely that as these systems become more popular, more industries will become eager to embrace distributed ledgers for their own applications. Thus, this move by IBM is solid confirmation that the Blockchain revolution is well underway.