IBM’s Jesse Lund recently revealed that the firm has been working with several central banks on digital currency projects, and said that a central bank digital currency will be issued soon.
In an informal ask-me-anything session on reddit, which began on March 22 and appears to be ongoing, IBM’s head of blockchain solutions for financial services, Jesse Lund, said that the public should “definitely” expect to see a central bank digital currency (CBDC) issued on the Stellar network “soon.”
Asked how far off he believes such a development is, either on Stellar or on another blockchain, he replied, in all capital letters, “VERY VERY CLOSE.” The tech giant, he said, is “aggressively working with” central banks, as well as other financial institutions, to issue digital assets. He declined, however, to identify which country or countries’ central banks might be issuing the CBDCs, explaining that he was “not in a position to talk about clients yet.”
IBM has been using Lumens, the native token of the Stellar blockchain, “as a bridge asset to support real time [foreign exchange] and settlement” in what Lund calls its “cross border payment solution,” which is ostensibly aimed at commercial banks. However, the firm is also pursuing technology that would allow for “other digital assets,” including digital currencies, to be used in transactions on the Stellar blockchain “as an alternative and complement to Lumens.”
One of the payments solutions that IBM has devised enables parties to transact without the need for “any agreement in place prior to transacting” because in that configuration, “each transaction is an atomic set of operations that either settle in real time or don’t.” Lund also alluded to the possibility of tokens moving between the Stellar network and “interoperable blockchains.”
IBM offers clients an added “‘permissioned’ construct on top of the public Stellar network,” meaning that although the Stellar blockchain is public, the firm has devised a way to establish a private platform within it, where IBM has the authority to validate transactions.
According to Lund, IBM is working on adding to this solution an optional “token lifecycle management product,” which would allow entities including central banks to issue their own digital assets and rely on “IBM for token engineering and lifecycle management.” This lifecycle management would presumably include an optional mechanism that would enable the assets to be burned, or in the parlance of fiat currency, retired from circulation.
Several nations have publicly discussed the possibility of debuting state-issued cryptocurrencies, though none of them are known to be collaborating with IBM on such projects.
Among these are Venezuela, which is currently midway through an ICO and has unveiled vague plans for another state-issued digital asset. Both of these tokens are expected to be asset-backed.
Russia has floated the idea of a CBDC for domestic use only and one for the member countries of the Eurasian Economic Union, namely, itself, Armenia, Belarus, Kazakhstan and Kyrgyzstan, and the set of nations known by the acronym BRICS: Brazil, Russia, India, China, and South Africa.
In January, Indonesia’s central bank announced plans to trial a CBDC this year.
Israel has expressed interest in issuing a state-backed cryptocurrency as well, and China is working on its own “Digital Currency [for] Electronic Payment.”
The premier of Montserrat recently signed a Memorandum of Understanding that calls for a study into a possible CBDC. Separately, the Eastern Caribbean Central Bank, which serves Montserrat, is planning its own CBDC trial.
In a paper published on March 12, the Bank for International Settlements examined some of the possible implications of CBDCs.
Adam Reese is a Los Angeles-based writer interested in technology, domestic and international politics, social issues, infrastructure and the arts. Adam is a full-time staff writer for ETHNews and holds value in Ether and BTC.