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Stellar IBM Partnership and IBM's 3 Stellar Products

Since October, IBM has been publicly building distributed ledger products on top of Stellar (XLM). Below, we piece together the disparate sources of information about the Stellar and IBM partnership to understand how the relationship works. Learn more about why IBM chose Stellar Lumens here.


IBM provides financial institutions with enterprise-level, Stellar-based products for 1) validating the Stellar public network, 2) facilitating cross-border transactions with lumens (XLM) as the current bridge asset, and 3) issuing any asset on the Stellar network. Both IBM and Lightyear (SDF's for-profit arm) provide services to companies who want to operate on the Stellar network, but IBM serves larger, more risk-averse clients like banks and central banks, while Lightyear's clients are smaller entities like remittance companies.


Banks, central banks, money transfer operators, and financial institutions regularly outsource technology integrations to IBM. These entities are now interested in distributed ledgers, but would rather go to a trusted firm to apply DLT to their businesses vs attempt to do it internally.

IBM’s value-add is the validating and operational presence on the public Stellar network that makes it more attractive for enterprises to deploy assets and solutions on publicly accessible blockchain networks.

- Jesse Lund, VP Blockchain, IBM (1)

IBM clients’ DLT needs fall into two overall camps: private networks or public networks. IBM provides a private, permissioned solution via Hyperledger that can be extended to a public solution on Stellar.

IBM’s Blockchain Platform strategy provides at its core, a toolkit to create secure private Blockchain networks using Hyperledger Composer and Fabric, as well as interoperability with public networks such as Stellar.

- Jesse Lund (1)

Private Networks via Hyperledger

Hyperledger Fabric is IBM’s private, permissioned DLT solution and is open-sourced underneath Hyperledger Foundation, a Linux Foundation DLT extension. The Stellar Development Foundation (SDF) joined the Hyperledger Foundation as an associate member.

Hyperledger Umbrella was missing a ‘coin’ capability. It now has one.

- Michael Dowling, Group CTO, Blockchain Financial Services, IBM (2)

SDF and Hyperledger are in an "active conversation" about "Stellar contributing the stellar-core code base to the Hyperledger program". (1)

I️ would hope Brian (the head of Hyperledger) and co. find a way to implement the SCP (Stellar’s consensus protocol) into the other HL projects.

- Jesse Lund (1)

Public Network on Stellar

IBM provides the following Stellar-related DLT products:

  • Validators (nodes) - “IBM’s validating presence adds a ‘permissioned’ construct on top of the public Stellar network.” (1)
  • Universal Payment Solution - “We have built a real time universal payment solution on top of this validation layer.” (1)

IBM plans to introduce the following Stellar-related DLT product:

  • Token Lifecycle Management Product - “[We are] adding a token lifecycle management product soon, which would allow asset issuers to launch their own tokens (ICOs, CBDCs, digital commodities, utility tokens, etc), leveraging IBM for token engineering and lifecycle management.” (1

IBM’s Stellar Validators

At the time of publication, IBM runs 9 validators in the Stellar network.

IBM provides a major validating presence on the public Stellar network (see, adding enterprise/permissioned capabilities (like business rule enforcement) for asset issuers as well as transaction processing for our cross border payments solution.

- Jesse Lund (1)

IBM’s Universal Payment Solution

This is the key value IBM provides its DLT clients, allowing banks to quickly clear and settle cross-border transactions on one single network. IBM “wants to speed up the ‘costly, laborious and error-prone’ process of making global payments in different currencies.” (3)

In partnership with SDF and currency exchange KlickEx, IBM provides members of Advanced Pacific Financial Infrastructure for Inclusion (APFII) “payment initiation, compliance verification, foreign exchange and settlement” 4 as real-time, cascading steps for each transaction. Using IBM’s Universal Payment Solution and instructions laid out in smart contracts on Hyperledger Fabric, payments are settled on the Stellar network, becoming “immutable and final once recorded”. 4

The Universal Payment Solution on the Stellar network is live in the South Pacific and matches currencies across 13 countries and 7 different trade lanes. It uses a bridge asset to take the 3-5 day clearing and settlement process of today down to near real-time. (5)

Our goal for 2018 is to establish operational corridors and to grow and operate a network of financial networks that facilitates low cost, direct, real time cross-currency clearing and settlement of all payment types and values (hence, “universal”). Eventually we'll support other asset classes to, which is what Stellar is really great for.

- Jesse Lund (1)

In Q2, this product will receive an official trade name and will no longer be called “Universal Payment Solution”. (1)

IBM’s bank partners for the Universal Payment Solution include: Banco Bilbao Vizcaya Argentaria, Bank Danamon Indonesia, Bank Mandiri, Bank Negara Indonesia, Bank Permata, Bank Rakyat Indonesia, Kasikornbank Thailand, Mizuho Financial Group, National Australia Bank, Rizal Commercial Banking Corp. (RCBC) Philippines, Sumitomo Mitsui Financial Group, TD Bank, Wizdraw (HK) of WorldCom Finance, and other financial institutions. (6)

This new implementation is poised to affect a profound change in the South Pacific region, and once fully scaled by IBM and its banking partners, could potentially change the way money is moved around the world, helping to improve existing international transactions and advancing financial inclusion in developing nations.

- Jed McCaleb, SDF Co-Founder and CTO (6)

Lumens (XLM) as a Bridge Asset

IBM’s Universal Payment Solution currently uses the lumen as the bridge asset for cross border transactions.

IBM’s cross border payment solution leverages lumens as a bridge asset to facilitate real time FX for the final settlement of payments. That will continue to be an option for the platform even as additional assets are deployed to the Stellar network (CBDCs, etc).

- Jesse Lund (1)

XLM is ONE of the assets on Stellar. It’s also used to “pay” for transactions on the network. So, XLM has 1) value and 2) utility. There will be other assets. So, for example, let’s say that a fictional island nation called Stellarisle has a central bank, and that central bank want to issue currency assets (i.e. “obligations of the CB”) on Stellar. In that case, Stellar is still used, and XLM is used to power those transactions for those assets, even though XLM isn’t directly used as the settlement mechanism. Kinda like how Ethereum works. So does it really matter if XLM is the settlement mechanism at all times? No. I️ think what really matters is 1) the safest settlement mechanism is used for two transacting parties, and 2) XLM is still used even as a utility. In this central banking example, it is.

- Michael Dowling (2)

Issuing Other Assets

In the future, lumens won’t be the only bridge asset that IBM clients use. IBM clients will use IBM’s future Token Lifecycle Management Product to issue assets on the Stellar network, and one of the uses for these assets may be bridging transactions, likely using a central bank digital currency (CBDC).

There are no plans for IBM to issue its own token today, but we are aggressively working with commercial banks, central banks, and other FIs to issue other digital assets (e-money, digital currency, digital gold, etc) on Stellar to be used in the same way / as an alternative and complement to lumens-- I think you'll see a CBDC soon.

- Jesse Lund (1)

As more digital assets of different classes become accessible and transferrable on public / interoperable blockchain networks, it’s easy to see a future for optimized clearing and settlement across other asset classes (i.e. securities) beyond cash / FX. We think the public Stellar network is a great home for diverse digital assets to live and may become more involved in token engineering, token economics, and token lifecycle management to that end.

- Jesse Lund (1)

Banks and large corporates seem hesitant to hold cryptos on their balance sheets due to regulatory restrictions and/or volatility. That’s why we provide two modes of operation in our universal payment solution—a gross settlement option using a digital asset bridge (initially XLM, but support for others coming soon like CBDCs), and a net settlement option that allows counterparties to replace Nostro/Vostro accounts by dynamically issuing each other digital fiat tokens on the shared settlement ledger (Stellar). As more assets are made digital on Stellar and interoperable blockchains, I believe the gross settlement option will become the preferred because it doesn’t require counterparties to have any agreement in place prior to transacting—each transaction is an atomic set of operations that either settle in real time or don’t. That’s the basis of agreement between counterparties, one transaction at a time.

- Jesse Lund (1)

Central Banks

According to Jesse Lund, IBM is “VERY VERY CLOSE” to helping a central bank issue fiat currency on the Stellar network. (1)

Future DLT Clients

We are in active discussions with CLS and Visa (who are longstanding and important clients of IBM) to explore opportunities for alignment with our universal payment solution and their solutions/services, but have not signed any definitive agreements with them yet specific to this, although we are actively working on parallel Blockchain projects with CLS.

- Jesse Lund (1)

My team has no direct interaction yet with SWIFT, but we are very open to collaborate with them.

- Jesse Lund (1)


A very unique capability with Stellar is the ability to issue an asset directly on the network, and specify how that asset is managed on the network and what nodes validate and confirm transactions. That means we can work with other parties - such as traditional fiat currency issuers (stay tuned :) ) - and help them feel safe about issuing on-chain. Together with the technology we developed at IBM using Hyperledger Fabric, the ability to clear transactions with very fast settlement using lumens was a no-brainer and a perfect match. Together, traditional - and non-traditional - Financial institutions can settle using a cryptocurrency/digital asset, with those transactions directly tied to counter-terrorism financing, AML, and KYC processes required by regulators around the world. Basically, it’s the missing piece those institutions need to move forward transacting with digital assets.

- Michael Dowling (2)


Some questions we have:

  1. What does Hyperledger provide that the Stellar network doesn’t, besides being private?
  2. Why use smart contracts on Hyperledger instead of Stellar?
  3. Why perform KYC/AML on Hyperledger instead of using Stellar’s compliance product?


  1. AMA by Jesse Lund, VP Blockchain, IBM
  2. AMA by Michael Dowling, Group CTO, Blockchain Financial Services, IBM
  3. IBM has a new blockchain for banks to speed up cross-border payments, CNBC
  4. On the horizon: New blockchain solution for cross-border payments, Blockchain Unleashed: IBM Blockchain Blog
  5. Marie Wieck: Blockchain for the Enterprise, Dean's Seminar Series, Northwestern University
Originally published