With the rise of blockchain technology and cryptocurrencies such as Bitcoin, Litecoin, and Ethereum, many companies and financial institutions are looking to take advantage of the new distributed ledger technology. The newest initiative underway comes from IBM (Internal Business Machines) Corporation, one of the largest multinational technology companies in the United States. IBM is partnering up with Stronghold, a fintech startup, to launch a cryptocurrency know as stablecoin, which will be tied to the US dollar. The currency itself, which combines 21st-century technology with concepts first employed in the Great Depression, is aimed to enable large financial institutions and banks to process payments more efficiently and more securely.
In specific, the fintech startup Stronghold is launching USD Anchor, which will run on the Stellar blockchain to validate and verify transactions. In the past, the Stellar protocol has not seen the same level of adoption as other cryptocurrencies, primarily due to its lack of network access. For other cryptocurrencies, public exchanges such as Coinbase have provided easy access. Even further, altcoins such as Zcash and Litecoin have seen major growth as well due to having platforms which exist that allow them to be exchanged for US dollars and other fiat currencies directly. On the other hand, anyone wanting to invest in Stellar lumens (XLM), which are exchanged on the Stellar platform, have to first exchange Bitcoin and then convert to XLM. However, with the introduction of Stronghold, institutional investors can now exchange their US dollar for Stellar lumens and any other asset on the network through the Platform. The full benefit of Stronghold is realized through the custodial partnership with Prime Trust and the full-fledged partnership with IBM. Prime trust, a Nevada-charter trust company, provides values as it deposits cash invested in the cryptocurrency at banks insured by the Federal Deposit Insurance Corp (FDIC).
Financial institutions and institutional investors alike see many positives to the new stablecoin. Unlike cryptocurrencies such as Bitcoin and Ethereum, stablecoin is not subject to extreme price volatility as it is backed by federally insured cash deposits. At the same time, it still provides the benefits of liquidity, security, and exchangeability all the while delivering low transactions costs. With these benefits in mind, the Stronghold USD platform, which supports stablecoin, is practical for many applications, anything from everyday transactions to international wire transfers. By utilizing Stellar’s advanced blockchain protocol, the Stronghold USD can scale up to provide exchange for multiple fiat currencies. In particular, this application is more feasible with the support of IBM, who has more than 400 clients across fields such as financial services, supply chain, risk management, and health care which are looking to implement blockchain applications. As a whole, IBM is working with institutions to modernize the industry of cross-border payments and the corresponding banking. This thought was echoed by Jesse Lund, the head of blockchain services for financial institutions within IBM. Those at IBM, and in many financial institutions, believe that stablecoin and the Stronghold USD platform are a step in the right direction toward creating a reliable and secure platform for moving money across the globe.