IBM has decided to experiment with a digital currency that’s pegged to the United States dollar. The cryptocurrency stablecoin is tied to the government-backed currency that is the USD. The idea behind tying up the cryptocurrency with an existing currency is to reduce the volatility that’s often seen with digital currencies.
IBM has confirmed that this cryptocurrency, called Stronghold USD, is backed by Federal Deposit Insurance Corporation-insured U.S. dollars. The reserves are held by blockchain-focused asset manager Prime Trust.
IBM is experimenting with this digital currency as it wants to explore ways to help banks and financial institutions process payments faster and more securely. It has decided to do that with Stronghold USD because it’s pegged to the USD and won’t suffer from the drastic volatility that’s often seen in other cryptocurrencies, at least in theory.
Stronghold’s stablecoin is going to use the platform that was developed by Stellar, a company co-founded by former Ripple executive Jed McCaleb four years ago. This blockchain protocol will be used to issue and transaction Stronghold USD. Access to liquidity will be provided through its institutional exchange services.
The IBM blockchain itself is different from the original one used for Bitcoin. That blockchain allows anyone to participate while IBM’s blockchain will only allow trusted parties to use it.