The International Business Machines Corporation (IBM) has partnered with Stronghold to launch USD Anchor, a “stablecoin” like Tether (USDT), with a couple of key differences. USD Anchor uses the Stellar blockchain, unlike Tether which uses the Bitcoin blockchain via the Omni Layer protocol. Additionally, USD Anchor will be 100% insured by the United States’ Federal Deposit Insurance Corporation (FDIC). Dollar reserves for USD Anchor will be controlled by Nevada-based Prime Trust.
Stronghold’s Co-Founder, Sean Bennett, said, “The process for seamlessly managing and trading assets of any form from digital to traditional currencies, needs to evolve. Asset-backed tokens can provide seamless access to all currencies, improving the global movement of money.”
While Tether is mostly used on cryptocurrency exchanges when USD is not available, IBM envisions that USD Anchor will be used by financial institutions for payments. Essentially, USD Anchor would have all the advantages of cryptocurrency and be interchangeable with the USD. IBM plans on expanding to create stablecoins for other major fiat currencies.
IBM’s Head of Blockchain Services For Financial Institutions, Jesse Lund, said, “What we envision is a network that has multiple different asset classes living on it. You could have digital euros, digital dollars, digital pounds – and they are all really kind of running on the same networks.”
The Stellar blockchain is designed to have extremely low transaction fees of just 0.00001 XLM, which is USD 0.000003. This is much less than the Bitcoin blockchain which charges transaction fees on average of USD 0.10 to USD 1, with pre-SegWit fees going as high as USD 50. This means that USD Anchor will never have transaction fee issues, unlike Tether which can be negatively impacted in the event that Bitcoin transaction fees skyrocket.
The FDIC insures United States bank deposits up to USD 250,000. Currently, the organization running Tether keeps all of their money in two bank accounts, so practically none of Tether’s USD 2.7 billion reserves are insured if a bank collapse happens.
The CEO of Prime Trust, Scott Purcell, says that USD Anchor’s reserves will be 100% FDIC insured. This will probably require splitting up reserves between bank accounts that hold USD 250,000 each, which could prove quite tedious if USD Anchor becomes popular.
It is not uncommon for Tether to issue 250 million USDT at once, for USD Anchor this would require the creation of 1,000 new bank accounts. To hold the same amount of reserves as Tether, USD Anchor would need 10,800 bank accounts to maintain full FDIC coverage.
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