IBM is investigating whether the cryptocurrency hooked to the U.S. dollar might be the good option for making payments as compared to other cryptocurrencies, which are highly volatile.

IBM is a leading firm in providing business applications for blockchain, with the help of digital ledger technology which supports Bitcoin to help companies track supply chains and international payments easily.

For making such payments, presently IBM uses cryptocurrency called Stellar Lumens as a channel. Currently, IBM has started testing stablecoin or “crypto dollar” which runs on stellar blockchain network. Stablecoin is called Stronghold USD, after fintech startup Stronghold has joined the project.

IBM’s senior vice president of global industries, platforms, and blockchain, Bridget van Kralingen states “There’s this tremendous opportunity to make blockchain payments feasible, especially for cross-border.” She further added, “What is great about this is they are just basically digital dollars—digital fiat currency.”

They might reduce the foreign exchange costs linked with making cross-border blockchain payments, which has only done conversation with one government issued, or fiat, currency. For instance US dollar to Stellar Lumens and again into other fiat currency like Mexican pesos. By utilizing stablecoin as a proxy for fiat currency could decrease the risk of getting the worst exchange rate when money is converted back to fiat currency states van Kralingen. The main reason to choose stablecoin is that cryptocurrencies like Stellar Lumens or Bitcoin are highly volatile.

She states, “We believe this experimentation with stablecoins can play a very big role in improving costs,” Whereas IBM is presently only working with the Stronghold USD stablecoin, it is interested in probably using similar digital versions of other countries’ legal tender. “I think if it can be done with the U.S. dollar, it can be done with almost any currency,” states van Kralingen.

Though most of the stablecoins are built upon on the blockchain systems of Bitcoin and Ethereum, Stronghold USD is the only stablecoin which will run on the stellar network. This permits Stronghold USD to process hundreds of transactions per second which are far better as compared to other cryptocurrencies. Bitcoin can perform maximum 7 transactions per second.

Central banks are more interested in using digital versions of government currencies. Hence, stablecoin will make its way for “Fed Coin” along with the use of cryptocurrency by banks in general.

IBM also declared a collaboration with Columbia University to begin the Columbia-IBM center for Blockchain and Transparency. It provides students access to IBM internships and joint research.

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