Stronghold, a San Francisco-based financial institution that has been developing an asset agnostic payment and trade ecosystem, has launched an asset-backed token on the Stellar network, the first venture supported USD anchor for the network.
Buyers of the coin will deposit U.S. dollars with Stronghold’s partner bank, Nevada-based Prime Trust, enabling Stronghold to issue the tokens on a 1-to-1 ratio, according to Reuters.
Stronghold also announced a partnership with IBM Blockchain to identify Stronghold USD uses in blockchain business networks. The goal of this partnership is to test ways for financial institutions and other parties to achieve more efficient, safer and faster transactions.
Stronghold plans to use the Stellar protocol to transact Stronghold USD and provide access to liquidity via its exchange services.
Liquidity Mechanism
Using an asset-backed token with reserves held in a state chartered trust provides a liquidity mechanism for global foreign exchange settlements, Stronghold noted in a press release, in addition to allowing banks to provide credit to trade ecosystems and transactional networks.
Such tokens offer the benefits of cryptocurrencies while reducing price volatility and following sound monetary policy. The tokens also provide support to industries with substantial regulatory requirements.
“The process for seamlessly managing and trading assets of any form from digital to traditional currencies, needs to evolve as financial institutions are seeking ways to break into new asset classes like cryptocurrencies,” Sean Bennett, Stronghold’s co-founder and CTO, said in a prepared statement. “Asset-backed tokens can provide seamless access to all currencies, improving the global movement of money.”
“The digitization of real-world assets using blockchain can dramatically transform many forms of financial transactions conducted around the world,” added Jesse Lund, global vice president of IBM Blockchain. “New types of fiat-backed instruments, like Stronghold’s USD token, have the potential to improve the backbone of international banking operations and payments, giving banks an easier way to integrate with public blockchain networks without significant changes to their core banking and compliance infrastructure.”
Support For Institutional Investors
Stronghold’s participation will allow institutional investors to exchange U.S. currency for Stellar lumens and any asset on the Stellar network, Tammy Camp, Stronghold co-founder, noted in Medium.
The partnership, according to Camp, brings major implications to the blockchain industry, as lack of access has historically impeded the adoption of the Stellar protocol.
Traders have already exchanged USD for both ETH and bitcoin in early partnerships with exchanges such as Coinbase, Camp noted. The tradeoff for these partnerships, however, has been longer wait times and increasing fees for transactions.
Parties seeking to invest in Stellar lumens (XLM) have had to first purchase BTC or ETH and convert it to XLM, requiring numerous wallets, wait times and transactions in order to access the network, Camp noted. Because the platform now supports USD, a trader can now exchange XLMs without first using BTC or ETH.
Stellar’s protocol is especially helpful in cross-border transactions, providing the best choice for a party looking to transfer funds fast and efficiently.
More parties besides investors and traders will also have direct access to XLM, allowing them to take advantage of the Stellar network, Camp noted.
Also read: IBM to issue cryptocurrency token on public Stellar blockchain
Institutions Welcome To Participate
Stronghold has opened enrollment for a private beta for institutions looking to invest in or settle payments in cryptocurrencies. Institutional investors are invited to apply to the beta program.
Tokens are not available to retail customers at the present time, but this could change in the next few months. Retail customers can establish a Stronghold account and provide KYC if they want to get updates on the services as they become available.
Featured image from Shutterstock.
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