Is Stronghold Just Another Stablecoin?
Not your grandparent's fiat-backed asset.
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Last summer, Stronghold went live with its Stellar-based stablecoin. Like most stablecoins, Stronghold USD is backed by real assets and tied to the value of the U.S. Dollar. However, unlike its competitors, Stronghold isn’t targeted at the general public. Instead, it’s aimed at businesses and financial institutions.
In fact, Stronghold has dramatically reduced its support for general users. In April, it barred retail investors from its exchange. Stronghold USD may still be circulating on other exchanges in small quantities, but market aggregators like CoinMarketCap now list Stronghold USD as “inactive” for retail investors.
In any case, the project is now turning its efforts toward larger clients. To attract businesses and financial institutions, it’s focusing on regulatory compliance features. But many other blockchain platforms offer the same thing, so it’s worth taking a look at precisely what Stronghold has to offer.
An On-Ramp/Off-Ramp For Stellar
Stronghold’s key feature is its “on-ramp” and “off-ramp” to the Stellar blockchain. Essentially, Stronghold acts as an “anchor” and holds funds on behalf of its clients. From there, it issues credits that circulate on the Stellar blockchain. Later, the recipient can convert those credits back to regular funds.
This approach allows Stronghold to offer settlement solutions that are faster, cheaper, and more transparent than traditional alternatives. Basically, Stronghold’s use of blockchain technology means that a company doesn’t have to accept cryptocurrency in order to reap the benefits of blockchain.
Stronghold also provides regulatory features, such as KYC compliance tools, fund revocation, and account freezing. This is all quite valuable for Stronghold’s clients – many companies, especially those providing financial services, must maintain control over their customers’ funds in order to operate legally.
Although Stronghold has been integrated with Stellar from the start, it has joined forces with other projects as well. This May, Stronghold began to operate as an on-ramp/off-ramp for Interledger—a rival settlement protocol that is closely associated with Ripple.
A Stablecoin For IBM World Wire
Stronghold has also been working closely with IBM since the beginning. When Stronghold USD first went live last year, IBM began searching for use cases for the stablecoin. That culminated in March 2019, when IBM launched World Wire – a Stellar-based settlement system that supports stablecoins, including Stronghold USD.
As the name might suggest, World Wire focuses on foreign exchange and cross-border payments to a greater degree than Stronghold itself. To this end, Stronghold has created a special variant of Stronghold USD, which complies with the U.S. Treasury’s OFAC guidelines concerning international money laundering and trading.
IBM World Wire isn’t solely paired with Stronghold – it also supports bank-issued stablecoins and Stellar lumens (XLM). Still, the bigger picture should not be overlooked: Stronghold, Stellar, and IBM are all very closely associated with one another, and they are working on projects that are highly interrelated.
A Testnet For Libra Developers
Shifting gears entirely, Stronghold also offers a number of developer tools. Itrecently introduced new dev tools for Facebook’s Libra blockchain, allowing app developers to begin building and testing Libra apps.
Stronghold’s Libra testnet will allow developers to create regulatory compliance applications (such as KYC/AML tools), and Stronghold will also allow devs to issue custom assets. Libra partially serves the same class of clients that Stronghold does, so naturally regulatory compliance is a vital part of both projects.
Stronghold isn’t officially involved with Libra. Right now, it’s merely capitalizing on the long wait to Libra, as it charges a subscription fee for testnet access. Stronghold could become more involved with Libra in the future, but that’s more possibility than reality.
The Bigger Picture
A few things are apparent from the company’s efforts so far. First, Stronghold isn’t just a stablecoin: it’s a stablecoin with extensive services for regulatory compliance. Other stablecoins, including TrueUSD and CircleUSD have KYC checks during their redemption process, but Stronghold takes this further in that its stablecoin facilitates constant control of funds.
This focus on regulatory compliance sets Stronghold apart from many other stablecoins, but it doesn’t set it apart from other settlement platforms, which are all very interested in regulatory compliance and enforcement. Perhaps these similarities partly explain why Stronghold and its potential rivals are so eager to cooperate with each other.
This means that Stronghold is highly centralized: almost every aspect facilitates regulatory enforcement. Decentralization maximalists might not be happy with Stronghold and its partners, but at the same time, many people believe that wider crypto adoption is very important – and Stronghold is a highly visible part of that trend.