Just two weeks after IBM’s blockchain ambitions fell into doubt with the mysterious departure of Jesse Lund, Big Blue is set to lose another key advocate for the space. Modern Consensus has exclusively learned that Stanley Yong, the company’s Global Lead on Central Bank Digital Currency Solutions, is leaving the company.
Yong’s departure represents a big loss for the Fortune 100 firm and to its ambitions in the field of cross-border payments. Before being recruited by IBM, Yong spent a decade at the Monetary Authority of Singapore (MAS), where he was Head of Innovation Acceleration. That lofty title made him a credible spokesman for those who doubted that blockchain innovation could become a real priority for the traditionally slow-moving tech giant. And now that Yong is leaving, those doubts will surely resurface.
Yong’s exit comes just weeks after Jesse Lund, IBM’s global head of blockchain for financial services and digital currencies, vanished from the company. The company issued a weird “I can confirm that Jesse Lund is no longer employed by IBM” statement and the outspoken Lund would only say, “Yes, I’ve left IBM but am still optimistic about payments innovation using Blockchain.”
The Lund-IBM divorce was received as a crippling blow for blockchain’s future at IBM, with particularly ominous ramifications for the company’s partnership with Stellar. Lund had been a reliable cheerleader for Stellar within the company. Less than two weeks before Lund left IBM, he was still promoting Stellar. When the Stellar network froze for 67 minutes because it could not reach consensus on its ledger—exactly the kind of thing that makes old-fashioned banks very nervous—Lund took to his personal twitter to praise Stellar’s “Honest analysis” and characterize the freeze as “a great opportunity to drive improvements and resiliency into the Stellar network.”
Meanwhile, some within the company, including General Counsel Michelle H. Browdy, were said to be nervous about Stellar’s strong association with gray market ICOs and aspects of Stellar founder Jed McCaleb’s past. McCaleb had at one time owned Mt Gox, which eventually turned into BTC’s biggest-ever fraud and later co-founded Ripple, but was expelled by the board after installing his then-girlfriend, Joyce Kim, as an executive with no clear portfolio.
Lund, a former banker at Wells Fargo, swatted aside those concerns to undertake an ambitious initiative to drag cryptocurrency into the staid world of enterprise software. He turned to Stellar—Lund is a longtime friend of both McCaleb and Kim—and surprised the entire crypto community when IBM announced that its World Wire payment network would deploy Steller’s blockchain to help banks streamline cross border payments. The IBM-Stellar partnership lifted off to great fanfare in Toronto at Sibos in October 2017.
The effort to marry IBM’s ultra-conservative visage to the surfer bro image that Jed McCaleb has carefully cultivated was present even in the first press release. Lund put it succinctly: “We’ve got the bankers and the renegades altogether.”
Lund seemingly got off to a fast start and appeared to be helped by Yong’s connections in the world of Far East banking; early banks to test the World Wire platform included Philippines-based RCBC and Bank Busan of South Korea.
But since that early burst of banker-renegade romance, World Wire has stalled, failing to sign up many significant customers or do much volume on existing corridors, despite the marketing muscle of one of the world’s best-known brands.
With the departure of Lund and now Yong, it is fair to wonder whether IBM will remain committed to blockchain or to Stellar. According to CoinDesk, Jed McCaleb batted down concerns that the partnership would wither without its champion inside IBM. “No, we are still full steam ahead with World Wire,” McCaleb is quoted telling the site. But with Yong’s exit, doubts will surely grow even stronger.
An intriguing story line here may be emerging regarding IBM’s choice of Stellar in the first place.
When IBM plucked Stellar out of obscurity to anoint its token, many in the crypto community were left scratching their heads. Why would the best-known tech company in history select the 10th largest crypto currency as its partner?
At the time, a blogger for Stellar wrote a defense of IBM’s choice, listing “5 Reasons Why IBM Selected Stellar.” The first of those reasons cites IBM’s Global Blockchain Payments Leader Jo Lang’s talk on the “Fintech Insider” and quotes her saying, “Lumens are managed by a non-profit. All of the ownership is public and transparent.”
I have been covering Stellar for five years. For that entire time, I have been told that Stellar is “applying” to be a tax-exempt organization, such as a 501(c)(3) or 501(c)(4). To my knowledge, the IRS has never granted tax-exempt status. It is true that the Stellar Development Foundation (“SDF”) registered in Delaware as a non-profit, but that status can only be granted by the federal government. Any company—IBM, for example—can call itself whatever it likes, but unless the IRS grants 501(c)(3) or 501(c)(4) status, it would not be a non-profit in the eyes of the U.S. Government.
Furthermore, IBM is headquartered in New York State. The New York Department of Financial Services responded to a Modern Consensus inquiry to confirm, “Since taking the lead nationally in regulating the virtual currency market in 2015, DFS has approved the applications of 19 companies. It has also denied “applications that did not meet DFS’s standards” such as the case with Bittrex, which was denied on April 10, 2019. Firms that have been granted a BitLicense: Bitstamp (just this past April 9), Coinbase Inc., XRP II, and Circle Internet Financial, and others. NYDFS is the pre-eminent U.S. regulator of crypto currencies.
Why haven’t IBM or Stellar been granted a BitLicense? NYDFS would not comment to Modern Consensus on whether IBM or Stellar had inquired about applying for a BitLicense.
With the recent court order and “Investigation For Fraud” launched by New York Attorney General Letitia James against iFinex and Bitfinex, perhaps IBM’s sudden distancing from the space reflects concerns about the company not holding a New York State BitLicense and partnering in this space with a company that also does not hold a New York State BitLicense.
One respected executive I spoke to in this space described IBM and Stellar’s lack of a DFS BitLicense as a “huge red flag.” Why the Westchester-based company would choose to partner with Stellar instead of, say, Ethereum, which is 13x bigger, or XRP, which is 8x bigger and holds a New York State BitLicense, is difficult to comprehend. (Emails to Ms. Lang and General Counsel Michelle H. Browdy have not been returned as of press time. This story will be updated if they choose to comment.)
In the meantime, the departure of Jesse Lund and now Stanley Yong will certainly cause watchers of this space to wonder about IBM’s blockchain future.