Financial advisory firm Stronghold announced today that it will be launching the first ever “venture backed USD anchor” on the Stellar blockchain.
The “Stronghold USD” cryptocurrency is reportedly backed “at one-to-one U.S. dollars” per token. Additionally, the backup reserves will be held by Prime Trust, a US state of Nevada-regulated chartered trust company. Stronghold’s official announcement also notes that the Stellar Consensus Protocol (SCP) will be used to issue and validate Stronghold USD transactions.
Moreover, liquidity and custodian services for the venture backed token will be available through Stronghold’s institutional exchange and its partnership with Prime Trust.
Notably, IBM is working with Stronghold as well to experiment with different use cases for the financial institution’s new crypto token. Both companies will reportedly run tests to see if the USD anchor token can improve the efficiency of business networks on IBM’s “enterprise-ready” blockchain. The main goal behind this pilot program is to determine whether financial institutions can process transactions in a “faster, safer, and more efficient” way.
“Liquidity Tool For Real-Time Foreign Exchange”
Significantly, the Stronghold USD token may potentially be able to function as a “liquidity tool for real-time foreign exchange and international settlement”, according to the financial advisory company.
The asset-backed token could also “enable banks to issue credit” to traders and businesses, Stronghold notes. Additionally, the financial firm believes that “such tokens harness the promise of cryptocurrencies” while reducing the risks associated with volatile digital currencies.
Stronghold’s USD-anchored token will reportedly comply with all applicable regulatory requirements, the company notes, and follow a “sound monetary policy.” However, the token cannot be purchased by retail customers at the moment, although they might be able to "in the coming months." At present, the Stronghold token is “pre-approved” only as a business-to-business (B2B) stable coin for multinational companies, licensed portfolio managers, and financial institutions.
Asset-Backed Cryptos: “Improving Global Movement Of Money”
Sean Bennett, co-founder of Stronghold, stated that traditional financial institutions want to explore and “break into” emerging asset classes such as cryptocurrencies. He added that “asset-backed tokens” could help in this regard by providing banks with “seamless access to all currencies, improving the global movement of money.”
Meanwhile, vice president of IBM’s blockchain efforts, Jesse Lund, mentioned that “real-world assets” digitized on a blockchain could be instrumental in improving the efficiency of cross-border transactions.
Lund further noted that “fiat-backed instruments” such as the Stronghold USD token could help improve the effectiveness of banking transactions and payment systems worldwide. The IBM executive also said that all this could be possible “without significant changes” to traditional “banking and financial infrastructure.”