Daily Traders Edge

IBM Is Working With a ‘Crypto Dollar’ Stablecoin

July 17
10:39 2018

IBM is exploring whether a cryptocurrency pegged to the U.S. dollar may be a better option for making payments than other digital currencies, which tend to be volatile.

The computing giant is already a pioneer in business applications for blockchain, using the digital ledger technology that underpins Bitcoin to help companies track their supply chains as well as to make international payments more efficient.

For such payments, IBM currently uses a cryptocurrency known as Stellar Lumens as a conduit. Now, IBM will also begin testing a so-called stablecoin, or “crypto dollar,” that runs on the Stellar blockchain network. The stablecoin is called Stronghold USD, after the fintech startup Stronghold that is behind the project.

“There’s this tremendous opportunity to make blockchain payments feasible, especially for cross-border,” says Bridget van Kralingen, IBM’s senior vice president of global industries, platforms and blockchain. “What is great about this is they are just basically digital dollars—digital fiat currency.”

That may help cut down on the foreign exchange costs associated with making cross-border blockchain payments, which until now have required conversion from one government-issued, or fiat, currency—say the U.S. dollar—to the Stellar Lumens cryptocurrency, and back into another fiat currency, such as Mexican pesos. Using a stablecoin as a proxy for the fiat currency could reduce the risk of getting a worse exchange rate when the money is converted back into fiat currency, says van Kralingen, as the prices of digital currencies like Stellar Lumens as well as Bitcoin can often swing wildly.

“We believe this experimentation with stablecoins can play a very big role in improving costs,” she adds. While IBM is currently only working with the Stronghold USD stablecoin, it is interested in potentially using similar digital versions of other countries’ legal tender. “I think if it can be done with the U.S. dollar, it can be done with almost any currency,” says van Kralingen.

Stablecoins have become one of the biggest trends in cryptocurrency. Tether, the most widely used dollar-backed coin, now accounts for more Bitcoin trading volume than the U.S. dollar. A slew of other companies are also developing their own versions of a $1 coin, including CircleTrustToken, and Basis.

Continue Reading at Fortune

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