Legacy tech titan International Business Machines Corp. (IBM) continues to double down on blockchain, the underlying distributed ledger technology that powers cryptocurrency transactions like bitcoin, with a new plan to develop a "stablecoin," a digital token tied to an existing government-backed currency. (See also: Berkshire Hathaway Has Exited IBM: Buffett.)
IBM is working to build a digital currency called Stronghold USD, with reserves held by blockchain-focused asset manager Prime Trust, which is insured by the Federal Deposit Insurance Corporation. The project is intended to create a coin that is less volatile than popular virtual currencies led by bitcoin, the largest by market capitalization, which has lost two thirds of its value compared to highs reached in December 2017. IBM is aiming to create a virtual greenback that can also provide faster and more secure payments than current cryptocurrencies, to serve banks and other financial institutions.
Another stablecoin, known as tether, the most widely used dollar-backed coin, has been under heightened scrutiny lately as many accuse it of being used to prop up the price of bitcoin at the peak of last year's frenzy. Others cite concerns that Tether Limited, the company behind the tether coin, does not hold enough dollars to account for the number of tokens in circulation, as reported by CNBC. Despite the controversy, tether now accounts for more bitcoin trading volume than the U.S. dollar, and has started a trend for handfuls of other firms to develop their own dollar-backed coin, including Circle, TrustToken and Basis.
Big Blue and Blockchain
The century-old tech giant is already a pioneer in business applications for blockchain, helping its clients use the technology to manage their supply chains and send payments internationally. For its global payments service, IBM currently uses a digital asset known as Stellar Lumens. The new stablecoin will run on the Stellar blockchain network. Replacing a stablecoin for the fiat currency could help lower the risks of major swings in exchange rates and improve costs for IBM clients.
Also on Tuesday, IBM announced a new academic partnership with Columbia University to accelerate startups and innovation in the blockchain space. (See also: IBM Unveils Tiny Computer Based on Blockchain.)