The Interledger Foundation (ILF) has expanded its Interledger Protocol (ILP) to support organizations aiming to launch stablecoins.
While many entities are contemplating the introduction of digital currencies, there remains a lack of infrastructure for these assets to interact with one another. The Interledger Protocol addresses this gap by enabling seamless transactions across different types of currency, irrespective of issuer or blockchain platform, thereby enhancing interoperability in emerging payment solutions.
As legislative bodies like Congress develop regulatory guidelines for stablecoins, financial institutions and companies such as Fiserv, Mastercard, and Amazon are venturing into this space. However, without the requisite interoperability, these initiatives may fail to achieve broad adoption comparable to that of credit cards. This reliance on fragmented partnerships could result in a complex network of incompatible stablecoins, obstructing streamlined commerce and stifling future innovation.
The Interledger Protocol (ILP) is a free, open-source protocol similar to TCP/IP, designed for swift global financial transactions across borders and sectors. Co-created with input from financial service providers and standards organizations such as the World Wide Web Consortium, ILP supports innovative applications and paves the way for the next wave of digital currencies.
Through this protocol, entities that issue stablecoins can connect to a network, facilitating payment acceptance and transactions with other third-party stablecoins.
Core Benefits of This Framework
- Avoid the necessity for individual partnerships: By fostering broad interoperability, companies will no longer need to establish separate connections with providers through exclusive agreements;
- Create a bridge between stablecoins and fiat currencies: The true potential of tokenized assets can only be realized when they can transact with fiat currencies, which requires both to operate on the same network;
- Erect a global unified standard for stablecoin transactions: This interoperable network functions as a single global solution, reducing friction in cross-border stablecoin exchanges and broadening the reach and acceptance of stablecoins;
- Integrate interoperability from the outset: Instead of issuing a stablecoin and then later considering its compatibility with other networks, organizations can incorporate this feature during the initial design process.
This innovative global solution aims to enhance access to the digital economy. It was developed through ILF’s work in 40 countries, focusing on establishing interoperable payment connections among individuals, businesses, financial institutions, and governments.
