Michal Fludra | NurPhoto | Getty Images
IBM has teamed up with financial technology start-up Stronghold to launch a cryptocurrency that’s pegged to the U.S. dollar.
The tech giant has put its weight behind a so-called “stablecoin,” a digital token that, in principle, is tied to an existing government-backed currency, in order to reduce the volatility associated with virtual currencies.
In this case, the cryptocurrency, called “Stronghold USD,” is backed by Federal Deposit Insurance Corporation-insured U.S. dollars, IBM said Tuesday, with reserves being held by blockchain-focused asset manager Prime Trust.
IBM said it will experiment with the virtual greenback to explore ways of helping banks and other financial institutions process payments faster and more securely. The aim of stablecoins is to reduce the volatility that is commonplace in the cryptocurrency market.
But it follows much controversy surrounding a well-known stablecoin known as tether, which has been accused of being used to prop-up the price of bitcoin during last year’s spike in value.
Tether is also a contentious subject in the cryptocurrency world due to concerns surrounding its U.S. dollar reserves. The fear is that Tether Limited, the company behind the tether coin, does not hold enough dollars to account for the number of tokens in circulation.
