IBM Backs New Stablecoin Run on Stellar Blockchain
According to the latest news reports, IBM is partnering with fintech startup Stronghold on a stablecoin that is pegged to the US dollar. The new asset is also named Stronghold USD and uses a 1:1 price ratio to the dollar. This is only one of two stablecoins to use the Stellar Blockchain network. Stronghold USD is federally insured by Prime Trust bank.
IBM and Stellar
IBM has been using the Stellar Blockchain since 2017 to make cross-border payments, and is now reported to be testing the new stablecoin Stronghold. According to IBM’s global Blockchain vice president, Jesse Lund, IBM is looking at this new platform as a method to bring financial settlement into the transaction business network that the tech giant has been building.
IBM’s senior vice president of global industries, platforms and Blockchain, Bridget van Kralingen stated that this new project with Stronghold represented a huge opportunity for the company to streamline its Blockchain network for cross-border payments as well as reduce costs tremendously.
Prior to the launch of Stronghold, IBM was using Stellar’s native crypto XLM (Lumens) as a bridge to convert fiat currencies. This system was getting impacted doubly by variable intra-fiat exchange rates as well as the volatility of the cryptocurrency market.
However, a stablecoin is not impacted by the volatility of cryptocurrency markets and can be used as a digital proxy to fiat currencies.
Rise of the Stablecoin
Stronghold is the latest in a growing list of stablecoins that are now coming to their own in the cryptocurrency industry. More and more companies are beginning to adopt stablecoins, foreseeing them as an integral part of a fast emerging tokenized global economy.
For example, stablecoin Circle just closed a $110 million funding round early this year in partnership with Bitmain, the mining hardware maker. Another stablecoin reported to be in development is called Reserve that will use smart contracts to peg onto other cryptocurrencies rather than fiat currencies. Investors such as PayPal’s co-founder Peter Theil as well as cryptocurrency exchange Coinbase have shown their support for this project.
Many others (TrustToken and Basis, to name a couple) are looking at ways in which they can forge crypto-tokens that are not subject to the immense volatility of the cryptocurrency market.
And it is not just cryptocurrency projects that are interested in creating stablecoins. According to van Kralingen, even central banks are looking into how they can create digital versions of government fiat currencies. In fact, stablecoins could pave the way for the much-talked-about Fed Coins and also led to greater adoption of cryptocurrencies.