International Business Machines Corp is backing a new cryptocurrency pegged to the U.S. dollar, in a partnership with U.S.-based financial services provider Stronghold that adds stability to a sector known for its volatility, the companies said.
The so-called stable coin, Stronghold USD, launched on Tuesday on the Stellar blockchain platform. Buyers of the coin will deposit greenbacks with the company’s partner bank, Nevada-based Prime Trust for Stronghold to issue the tokens based on a 1-to-1 ratio, reports Reuters.
Stable coins, pegged to an asset like gold, or major currencies such the euro, pound and U.S. dollar, have emerged as issuers seek to expand uses for digital currencies, which are unregulated and volatile. Bitcoin, the most well-known token, has fallen around 55 percent so far in 2018 against the dollar, after surging more than 1,300 percent last year.
Cryptocurrencies are powered by blockchain, a shared database maintained by a network of computers connected to the internet.
Stronghold USDs are designed for use among businesses, such as financial institutions, multinational corporations, and asset managers, the company said. The tokens may be made available to retail customers in the coming months.
“The engineering work has been done on this token and we have seen a little bit of the early release of it,” Jesse Lund, IBM’s vice president of global blockchain, said in an interview.
“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.”
As applications that use blockchain and stable coins become more mainstream, Lund said, merchants, consumers and global suppliers will get cheaper, faster and safer alternatives to cash, credit cards, debit cards and wire transfers.
“The token allows folks to do payments, foreign exchange between companies in a very seamless and frictionless and more secure way,” Stronghold founder and Chief Executive Tammy Camp said in an interview.
“It enables people to be able to trade that token with other assets and other tokens as well,” she added.
IBM also announced on Tuesday a partnership with Columbia University to open the Columbia-IBM Center for Blockchain and Transparency. It will offer students access to IBM internships and joint research.