IBM to test dollar-pegged 'stablecoin'

IBM to test dollar-pegged 'stablecoin'

IBM is backing a new US dollar-pegged "stablecoin" as it looks to explore ways to make transaction processing and money transfers faster, safer and more efficient.

The USD Anchor stablecoin - a digital token that is backed one-for-one to the US dollar - has been launched by startup Stronghold on the Stellar Network, an open source protocol for value exchange. The token is backed by FDIC-insured US dollars with the reserves held by Prime Trust, a blockchain-focused asset manager.

IBM says that it will explore uses for the Stronghold USD within business networks on its blockchain platform, looking for ways that banks and others can tap into the technology for better transaction processing.

Stronghold says that its token can act as a new liquidity tool for real-time foreign exchange and international settlement, as well as enable banks to issue credit into transactional networks and trade ecosystems.

By pegging to the dollar, the firm hopes to reap the benefits of cryptocurrencies while also limiting price volatility, adhering to the rigors and integrity of sound monetary policy, and providing support for industries that have regulatory compliance requirements.

In a blog, Jesse Lund, VP, global market development, FSS - IBM Industry Platform, says: "The “stability” of stable coins could translate into improving the entire backbone of international banking operations, giving banks an innovative way to significantly update their core banking and compliance infrastructure while also helping to improve operational efficiency and regulatory transparency; not to mention, these types of enhancements tend to greatly improve user experience and can help bolster a renewed trust in banks."

On the Stronghold tie-up, Lund says that it could let banks begin extending credit to real-time transactional networks - giving them access to new markets and allowing them to participate in financing activities like Open Account trade transactions.

"There are still challenges to using stable coins, so this new solution will be explored further during a pilot period. The good news is that a successful implementation could be exactly what is needed for payments on blockchain to reach widespread adoption throughout the financial industry.

"Welcome to the revolution," concludes Lund.

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