By Gertrude Chavez-Dreyfuss

NEW YORK, July 17 (Reuters) – International Business
Machines Corp is backing a new cryptocurrency pegged to
the U.S. dollar, in a partnership with U.S.-based financial
services provider Stronghold that adds stability to a sector
known for its volatility, the companies said.

The so-called stable coin, Stronghold USD, launched on
Tuesday on the Stellar blockchain platform. Buyers of the coin
will deposit greenbacks with the company’s partner bank,
Nevada-based Prime Trust for Stronghold to issue the tokens
based on a 1-to-1 ratio.

Stable coins, pegged to an asset like gold, or major
currencies such the euro, pound and U.S. dollar, have emerged as
issuers seek to expand uses for digital currencies, which are
unregulated and volatile. Bitcoin, the most well-known token,
has fallen around 55 percent so far in 2018 against the dollar,
after surging more than 1,300 percent last year.

Cryptocurrencies are powered by blockchain, a shared
database maintained by a network of computers connected to the
internet.

Stronghold USDs are designed for use among businesses, such
as financial institutions, multinational corporations, and asset
managers, the company said. The tokens may be made available to
retail customers in the coming months.

“The engineering work has been done on this token and we
have seen a little bit of the early release of it,” Jesse Lund,
IBM’s vice president of global blockchain, said in an interview.

“IBM will explore use cases with business networks that we
have developed, as a user of the token. We see this as a way of
bringing financial settlement into the transactional business
network that we have been building.”

As applications that use blockchain and stable coins become
more mainstream, Lund said, merchants, consumers and global
suppliers will get cheaper, faster and safer alternatives to
cash, credit cards, debit cards and wire transfers.

“The token allows folks to do payments, foreign exchange
between companies in a very seamless and frictionless and more
secure way,” Stronghold founder and Chief Executive Tammy Camp
said in an interview.

“It enables people to be able to trade that token with other
assets and other tokens as well,” she added.

IBM also announced on Tuesday a partnership with Columbia
University to open the Columbia-IBM Center for Blockchain and
Transparency. It will offer students access to IBM internships
and joint research.
(Reporting by Gertrude Chavez-Dreyfuss; Editing by Richard
Chang)