IBM's Head of Blockchain Solutions - Jesse Lund - and Stellar Development Foundation's Founder - Jed McCaleb - provided additional details about their partnership and vision for payments at Blockchain West. Watch the full video here.

According to Lund, Project Jasper from Canada’s central bank and Project Ubin from Singapore’s central bank have issued digital currencies (network unknown). They are not circulating these currencies to the public though:

They are only using it as a way to move money back and forth between the banks. Now, that’s exactly what the $100,000 bill was for. Did you actually know that there was a $100,000 bill issued, but it wasn’t for circulation to the general public? It was used as an instrument so that the big banks could pay large balances to each other. You move the paper and the value transfers immediately with that transfer of ownership of that instrument. That’s kind of what these digital currency initiatives so far have been focused on.

DLT offers many useful business use cases - “workflow management solutions, supply chain management, business process optimization, provenance...global trade...food trust, food safety”, but Lund thinks:

They become even more compelling when they are married with a real world store of value and that ability to exchange that value in real time - like the digital equivalent of handing somebody a $100,000 bill; when the data and the value can live together on a network and can move together.

According to Lund, IBM started with a focus on private blockchain solutions, but:

What we are realizing is that clients, even enterprise clients, have use cases that have a need for publicly accessible networks where digital assets can live, and this is exactly the reason that we are providing, within the IBM Blockchain platform, connectivity to public networks like the Stellar network so that, in addition to the exchange of data and the private exchange of value, that value in a private network can be redeemable in the real world. Real monetary redeem-ability and access to liquidity.

Lund believes Sweden’s central bank is the most forward-thinking central bank:

Take Riksbank - one the central banks that I have been in talks with recently - is the oldest central bank in the world - 350 years old. They have a strategy for a full digital currency. It’s an initiative called the eKrona. It’s probably the most inspiring vision for a systemic, cashless, real-time society that involves the use of a digital currency issued by a central bank.

According to Lund, DLT benefits extend beyond cost savings for banks and into new markets and revenue growth:

Over 2 billion unbanked adults in underserved emerging economies exist, and more than half of these folks carry smartphones - the capacity to do electronic banking and the capacity to store and transmit electronic money. That’s a huge new market - a new revenue opportunity for banks. Imagine billions of people that aren’t even in the banking system yet. And not only is that a huge unreached market, but it’s also an opportunity to do social good. A lot of these economies are starved because of unstable governments that are preventing reputable financial institutions from coming in and establishing business there - it’s too volatile for them.

McCaleb reiterated SDF’s structure as a foundation:

[Stellar] is a nonprofit, so it doesn’t exactly have a business model. The intent is to be a lot like the Linux Foundation where we are eventually supported by the companies and financial institutions that depend on the network.

Lund asked if a central bank digital currency would make commercial banks obsolete:

The Stellar network already blew up and now they are seeing all sorts of different coins and different digital assets that exist on there. It’s not too inconceivable to think that a central bank might issue a digital token that represents a claim on fiat deposits held at the central bank. That would be great, except now all the sudden, if you can hold the digital dollar in a wallet that essentially sits on my phone that represents a claim on deposits at the federal reserve bank, why do I need Wells Fargo?

Lund then answered his own question:

But you do need Wells Fargo for at least two basic reasons. The federal reserve is not going to pay you any interest. The federal reserve is not going to extend you any credit. So commercial banks are always going to be there. The central banks don’t do KYC/AML or the things that have to happen to make sure that you are not participating in some nefarious activity.

McCaleb lays out the reasoning behind SDF’s strategic progression from remittance companies to larger banks to the poor:

When we first started Stellar, we started with micro-finance institutions in Africa. But what we quickly found is that it’s useless unless it’s connected to the larger banking system. You need a bank on the network before you can reach the poorest of the poor because what they need is access to the financial network. It’s a three phase approach: First we are engaging remittances companies, and then larger banks, and then we will be able to serve the poor individuals.

McCaleb mentioned some of the assets that are coming to the Stellar network:

There are all kinds of creative things that people are doing. There’s carbon credits, gold, gold that’s still in the ground that they haven’t pulled up yet, this plethora of ICOs and tokens, municipal bonds. Anything that you can tokenize. I think in the future - whether it’s on Stellar or not - most forms of value will be tokenized because it’s a better way to represent things and keep track of things. It’s more exchangeable for other stuff.

McCaleb talked about how lumens are used in the Stellar network:

Lumens are always needed as a DDOS prevention mechanism to prevent the network from being spammed. And I think if one central bank issues a token - their digital currency - the lumens can be used as a bridge currency when you want to go from fiat to a different kind of fiat. Maybe lumens are a natural choice for bridging two currencies.

Lund laid out his vision for assets on the Stellar network:

We created a significant validating presence on the Stellar network because we see it as a really viable, scalable, digital asset registry. So as more tokens or assets of different classes are represented as tokens on the network like a claim on real world assets, there’s all sorts of new use cases that are enabled if you look at the capital markets space. There’s this rush to close the time between trade date and settlement date. When you actually buy a security or stock or mutual fund, you pay the money, but the transfer of ownership of the security doesn’t get to you for three days. You see it in your broker, but it doesn’t actually settle. It’s odd - we spent millions and billions of dollars to go from trade-date-plus-3-days to now trade-date-plus-two-days. But if the cash equivalent is a tokenized asset and the securities like with ICOs exist as a digital asset, the transfer of value and the transfer of ownership just happen through the distributed exchange in real time. The network can actually become this space where new primary and secondary markets are created. These are highly efficient markets because these different asset classes can exist on the same network. They can be held in the same wallet which is actually profound.