New Stablecoin Pegged to the USD
According to a report made by CNBC. Stronghold, a startup that specializes in fintech, is releasing a new cryptocurrency that will be tied to the US Dollar. The new crypto which will be named “Stronghold USD” will be backed at a 1:1 ratio with US Dollars which are kept by Prime Trust– an asset management company focused on blockchain. The money will be deposited by the registered company at banks which have the insurance of the FDIC.
Through this collaboration, IBM will explore new strategies for assisting financial institutions and banks make and process their payments faster and in a more secure way.
The project is one of the few endeavors that are trying to minimize the volatility which is of common occurrence in the cryptocurrency market.
“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 […] Asset-backed tokens can provide seamless access to all currencies, improving the global movement of money. We’re honored to work with IBM to explore new ways to use Stronghold USD within,” stated in a recent press release Stronghold’s CTO, Sean Bennett.
Stronghold’s coin will be supported by the Stellar network, which is the creation of Jed McCaleb, a former executive at Ripple.
A New Rival for Tether?
Stablecoins are considered to be an attempt to reduce the wild price fluctuations experienced by the cryptocurrency market by tying said coins to existing, more constant assets, which is actually the tokenization of the latter.
But in spite of the stability they offer, specialists have also shown that there are also many disadvantages that come with this idea, such as the integral reliance on the stability of the basic asset, in addition to requiring a centralized third party.
Another noteworthy downside is the associations that will be made at some point between Stronghold and Tether – another stablecoin that is pegged to the USD price, which has been recently caught up in controversy. The company that issues the USDT, Tether was accused of not owning enough USD to cover its cryptocurrency.
A US-based law firm independently established that the company did actually have the necessary sum of USD, according to a recent transparency report released by Tether. The ambiguity of Tether’s US Dollar funds, paired with accusations of influencing Bitcoin’s prices, is still generating a lot of doubt among many of the crypto community.
While it’s concept is similar to Tether, Stronghold’s stablecoin features a few essential differences to USDT. The first one would by that USDT is not covered by the FDIC. Also, there is backing from the Prime Trust – a state-employed trust company, which should assure investors that Stronghold USD is a fully backed up crypto.