Stronghold, a financial institution building an asset-agnostic global payment and trade ecosystem, is launching a cryptocurrency insured by the Federal Deposit Insurance Corp. IBM is partnering on the initiative with Stronghold, and will explore how to use the token.
Founded in 2017, Stronghold is built on the open source distributed ledger technology and connects the world with buying and selling assets in less than a minute. Stronghold represents USD, Bitcoin, Ethereum and Lumens on the Stellar Distributed Exchange.
The so-called stable coin, Stronghold USD, is an experiment designed to provide ways for financial institutions and other organizations to achieve faster, safer, and more efficient transaction processing and money transfer throughout the world’s economy.
According to IBM head of Blockchain Solutions, Financial Services, Jesse Lund, the idea of having a US dollar that circulates and has some crypto attributes, but doesn’t remove the regulatory oversight within financial institutions, combines “the best of both worlds”. Lund said:
“We’re really keen to explore the use of this — we’re calling this stable coin — which is essentially a fiat currency-backed digital asset or digital currency of sorts that’s actually backed by real money held in deposits at a chartered bank in the US.”
“The notion of a stable coin provides the best of both worlds. There are legitimate attributes of cryptocurrencies that make them attractive for certain use cases, such as the ability to store and transfer value electronically and then to move it efficiently without a significant number of intermediaries ultimately improves the customer experience and reduces fees and the complexity of processing.”
Lund thinks that partnering with the startup allows IBM to engage further on the practical applications of blockchain across different industries. He believes that it will help make payments between transacting counterparties faster and change the way of money moving across borders and performing foreign exchange.
“With bitcoin and traditional cryptocurrencies, there’s no regulating body — they are purely autonomous types of networks — but with stable coins, you actually do have a regulatory agency in place still, because the issuer of the asset is in this case a regulated financial services entity.”
Speaking of the partnership, Lund said:
“IBM will explore use cases with business networks that we have developed, as a user of the token. We see this as a way of bringing financial settlement into the transactional business network that we have been building.”
Having over 20,000 traders, Stronghold’s cryptocurrency trading platform is built on the Stellar network and pegged against US dollars.
According to Stronghold founder and Chief Executive Tammy Camp, the Stronghold token allows users to do payments, exchange between companies in a more secure way, and enables people to be able to trade that token with other assets and other tokens as well.
Stable coins are financial instruments developed to transform the way in which money moves. Their value is pegged to liquid or stable asset classes. Stable coins represent a market that is likely to grow in the near future with institutional cryptocurrency traders and hedge funds entering the industry looking for digital assets that will provide them more stability and security.
Developed not long ago, stable coins have already gained popularity. Recently, a Maltese cryptocurrency project STASIS launched a Euro-pegged stablecoin with the aim to bridge the gap between the decentralized cryptocurrency market and the traditional financial system.