Stronghold uses IBM blockchain for digital US dollar
Financial institution Stronghold has partnered with IBM to explore the possibility of a digital dollar running in parallel to physical cash on the IBM blockchain platform.
According to IBM head of Blockchain Solutions, Financial Services, Jesse Lund, the idea of having a US dollar that circulates and has some of the attributes that cryptocurrencies have, but doesn't remove the regulatory oversight that's in place within financial institutions, combines "the best of both worlds".
"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," he told ZDNet.
"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 believes that domestically, it will help make payments between transacting counterparties faster, while internationally it will change how money moves across borders and how foreign exchange is performed.
"That's kind of what bitcoin revealed to the world: That electricity could be converted to monetary value and that value could be sent around the world," he explained.
"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."
Founded in 2017, Stronghold is a financial institution building an "asset-agnostic" global payment and trade ecosystem.
Boasting over 20,000 traders, Stronghold's cryptocurrency trading platform is built on the Stellar network, and settles in US dollars. Users can currently send, receive, and trade bitcoin, ethereum, and lumens. USD payment and trading are available for institutions.
One of the other downsides of cryptocurrency is the volatility in the exchange rate; as seen with bitcoin last year, the value of a digital coin can wildly swing up and down. By comparison, the value of the Stronghold coin will at all times mirror the US dollar.
"Because the coin is actually backed by deposits held at a banking institution -- ultimately a custodian -- the value of the coin is actually pegged one-to-one to the US dollar," Lund said. "Essentially, it really is a digital dollar that can move around with the efficiency of expediency that bitcoin or ether or other cryptos do, but it's actually a real US dollar.
"I think we're actually seeing the birth of a new type of asset class, to be honest."
Stronghold will use Stellar's blockchain protocol to issue and transact Stronghold USD while providing access to liquidity through its institutional exchange services and the custodial relationship with its partnered trust company, the companies added in a statement.
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Also on Tuesday, IBM alongside Columbia University announced a new centre dedicated to research, education, and innovation in blockchain technology and data transparency.
The Columbia-IBM Center for Blockchain and Data Transparency will also boast an innovation accelerator to incubate business ideas from students, faculty, and members of the startup community.
According to Lund, partnering with academia allows IBM to engage further on the practical applications of blockchain across different industries.
"The focus is to really continue to explore the range and the depths of which blockchain can apply as a transformational tool for a number of different industries -- this is just another way to engage the academy in that respect," he told ZDNet.
If blockchain is going to be everything it promises, the world is going to need people who understand the technology.
"There's been a broad acknowledgement that this is one of the paradigm shifts -- transformational technologies -- and we want to make sure that we're helping to seed the base of resources and talent that can be applied to this in the future. It starts with training and collaboration," Lund said.
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