Bitcoin And Stellar Get A Big Boost From IBM's 'Stable Coin'

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IBM gave a big boost to Bitcoin and Stellar recently. On Tuesday, Big Blue announced a partnership with Stronghold the first digital currency backed by US dollars traded on the Stellar Blockchain Network.

That’s  a new way for IBM to make a blockchain-based “stable coin” available to IBM clients; and monetize its new technologies.

IBM’s announcement added fuel to Bitcoin and cryptocurrency rally, which began on Monday. XLM more than doubled over the last seven days —see tables 1 and 2.

Table 1

7d Price Change For Major Cryptocurrencies

Cryptocurrency %7d
Bitcoin 19.11
Ethereum 5.36
XRP 3.94
XLM 53.10

Source: Coinmarketcap.com 7/20/18 at 11:10 a.m.

[Ed. note: Investing in cryptocoins or tokens is highly speculative and the market is largely unregulated. Anyone considering it should be prepared to lose their entire investment. Disclosure: I don’t own any Bitcoin.]

Table 2

Number of Cryptocurrencies That Advanced/Declined In The Top 100 Ranks

Cryptocurrencies Advance/Decline Number
Advance 84
Decline 16

Source: Coinmarketcap.com 7/20/18 at 11:10 a.m.

The ‘Stronghold USD’ token is asset-backed (at one-to-one U.S. dollars per coin) with reserves held by a state-chartered trust company. Stronghold will deploy Stellar’s blockchain protocol to issue and trade Stronghold USD.  It will also provide liquidity and custodial services.

That could help financial institutions “break” into cryptocurrencies. “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,” said Stronghold’s co-founder and CTO, Sean Bennett. “Asset-backed tokens can provide seamless access to all currencies, improving the global movement of money.”

Stellar co-founder and crypto pioneer Jed McCaleb said Stronghold’s USD anchor is “a cornerstone piece of bringing the Stellar network to mass market adoption.” Shidan Gouran, President and COO of Global Blockchain Technologies Corporation agrees. 

The introduction of Stronghold USD as an anchor on the Stellar network is a significant step forward for cryptocurrencies. This is because instead of Stellar trying to compete with chartered financial institutions, they were able to include them in a productive way that is beneficial to everyone. Already, this asset has usability on IBM’s blockchain applications, since an asset like Stronghold USD has the stability that is requisite for big-name players to make transactions on a blockchain platform. Since Ripple does the opposite of working around traditional financial institutions, this has limited its success. Adding the Stronghold USD asset to Stellar capitalizes on this weakness, and this will make some serious waves in the blockchain and fintech industries in the coming weeks, putting Stellar into the spotlight.

And that can transform financial transactions and banking institutions. “The digitization of real-world assets using blockchain can dramatically transform many forms of financial transactions conducted around the world,” said Jesse Lund, global vice president of IBM Blockchain. “New types of fiat-backed instruments, like Stronghold’s USD, 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.”

Meanwhile, IBM reported a GAAP EPS from continuing operations of $2.61, and an Operating (non-GAAP) EPS of $3.08; both up 5%. Pre-tax margins expanded more than 100 basis points year to year.

That’s a gradual improvement from the previous quarters, thanks to a number of strategic initiatives that have helped the company forge strategic alliances in growing technology areas like blockchain.

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Paul Rosen