USD Anchor is the name of a new FDIC-backed stablecoin and is the latest fiat-linked initiative by the cryptocurrency community.
However, as opposed to previous stablecoins Tether (USDT) and TrueUSD (TUSD), this new coin benefits from U.S government backing in the form of the Federal Deposit Insurance Corp (FDIC).
The FDIC was established by the U.S government in 1933 during the great depression to provide American citizens with a sense of financial security. The FDIC has stood the test of time and to this day is still recognized as a trusted financial institution nationwide.
A collaboration with IBM and Stellar
The company launching USD Anchor is online cryptocurrency market Stronghold, a startup which has collaborated with IBM to explore how the computer giant can integrate USD Anchor into systems used by its financial sector clients.
Stronghold has chosen the Stellar proof-of-stake (PoS) blockchain to support the new FDIC-backed stablecoin and blockchain-based trust company Prime Trust to hold the capital that will back the coin. It believes the cryptocurrency community is in need of a strong, government-backed digital asset to attract institutional investors and help markets evolve. The new coin will also give traders the opportunity to buy stellar lumens (XML) via fiat-based methods.
Prime Trust is fully audited and operates strict anti-money-laundering (AML) and know-your-customer (KYC) compliance. This means it offers USD Anchor features that differ significantly from USDT, which is mainly used by online traders as a currency placeholder to avoid transaction times. USD Anchor is more likely to be used by the traditional financial institutions which have recently become somewhat enamored by virtual currencies.
Why an FDIC-backed stablecoin?
IBM hopes to see the project provide a system whereby transactions from multiple sources can be settled with a digital fiat currency on a singular blockchain. The company foresees a radically evolved foreign exchange market in the future where a variety of digital fiat currencies exist on one network.
This is not the first time IBM has worked with the Stellar blockchain. In October last year, IBM announced its interest in adopting the stellar lumens (XML) token as a foreign exchange method for South Pacific Islanders. Stellars scalability and mine-less consensus are noted by IBM as attractive qualities in supporting cross-border payments.
The emergence of an FDIC-backed stablecoin indicates a shift in the nature and requirements of cryptocurrency customers. It was not that long ago that traditional financial institutions scoffed at what they believed to be a flash-in-the-pan concept supported by would-be criminals and get-rich-quick scam artists.
Is institutional investment and the growing acceptance by regulatory bodies a positive sign for the direction of cryptocurrency, or are big banks secretly hijacking the decentralized revolution?
Mark Hartley is an IT specialist, freelance writer, keen traveler, and blockchain enthusiast. He has worked on the trading floors of the world’s biggest interdealer broker in London and helped integrate crypto-services into IT trading systems. When he’s not searching for the world’s most beautiful beach, he’s nose deep in any crypto and blockchain related news.