Banking, finance, and taxes

IBM Partners With FDIC-Insured Cryptocurrency

Paul Ausick

Published: July 17, 2018 11:25 am

Last Updated: January 11, 2020 8:54 pm

A startup cryptocurrency platform named Stronghold is getting some big-time help launching a new stablecoin from International Business Machines Corp. (NYSE: IBM). The Stronghold USD is a U.S.-dollar-backed token that is also FDIC-insured by a New York commercial bank.

IBM is a member of the same Stellar network as Stronghold, a network infrastructure designed to handle decentralized payments. Stronghold USD is an anchor on that network; that is, an entity entrusted to hold deposits and issue credits into the Stellar network for those deposits. Anchors are, essentially, a bridge between existing fiat currencies like the U.S. dollar and the Stellar network where all money transactions occur as credits issued by anchors.

Stronghold’s collaboration with IBM calls for figuring out how to use Stronghold USD within IBM’s own Blockchain Platform. In a statement cited by VentureBeat, IBM said:

IBM is endorsing [Stronghold USD] and has consulted with Stronghold on the technology. IBM will be taking this to a broader range of clients moving forward. IBM is a partner of Stellar, the network on which this work is running. Stronghold USD is a new type of digital instrument that provides the foundation for transforming real-time domestic and international payments, backed by the U.S. dollar. This is the next milestone in IBM’s support of the token economy.

Stronghold chief technology officer, Sean Bennett, said in a statement:

The process for seamlessly managing and trading assets of any form, from digital to traditional currencies, needs to evolve as financial institutions are seeking ways to break into new asset classes like cryptocurrencies. Stable coins can provide seamless access to all currencies, improving the global movement of money.

Because stablecoins like Stronghold USD are backed with real assets, users may feel more confident using them because their value is not subject to the wild price swings we all read about with bitcoin and other cryptocurrencies. Stablecoins represent ownership of real assets but may be more fluidly exchanged between counterparties and result in virtually instant transaction settlement, a process that often can take 60 days to complete.