Stronghold, a startup founded last year, has announced a venture-backed USD token on the Stellar Network and announced its collaboration with IBM to explore its uses on the IBM Blockchain Platform.

According to the official release, 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, Prime Trust, which will deposit the cash at banks insured by the Federal Deposit Insurance Corp (FDIC). It is a pre-approved token, solely designed as a B2B solution for financial institutions, multinational corporations, and asset managers.

“Asset-backed tokens can provide seamless access to all currencies, improving the global movement of money. We’re honored to work with IBM to explore new ways to use Stronghold USD within,” said Stronghold’s co-founder and CTO, Sean Bennett.

Stronghold touts the new token as a “stable coin” which will limit price volatility, adhering to the rigors and integrity of sound monetary policy, and providing support for industries that have regulatory compliance requirements.

“Since federally-insured cash deposits back Stronghold USD, it is not subject to the price volatility of a pure cryptocurrency like Bitcoin or Ether. Stronghold USD still provides the benefits of secure, immediate exchangeability, anywhere, anytime, with low transaction costs and fewer intermediaries than traditional bank transfers,” Stronghold said. “This makes Stronghold USD practical for everyday transactions, large value payments and international wire transfers.”

Currently, the tokens are not available for retail customers but may be available in the coming months. Jesse Lund, global vice president of IBM Blockchain told CoinDesk that Stronghold USD is now available to institutional clients and IBM aims to "put it to use as quickly as possible.”

“New types of fiat-backed instruments, like Stronghold’s USD token, 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,” Lund said.

CoinDesk noted the project’s similarity with Tether, which has been surrounded with controversies questioning whether the tethers in circulation were fully backed by the US dollar or not. The startup engaged with Washington-based law firm Freeh, Sporkin & Sullivan LLP (FSS) this year and following a review announced:

“The FSS report, based on a random date balance inspection and a full review of relevant bank account documentation, confirms that all Tethers in circulation as of June 1, 2018 are fully backed by existing USD reserves.”

Commenting on these comparisons, Lund said, “You can't talk about this without talking about Tether. But there are certainly some differences with Tether versus what we are doing."

In case of Stronghold USD, the involvement of Prime Trust and the FDIC coverage will help instill confidence in investors about the tokens being fully asset-backed.

Scott Purcell, CEO and chief trust officer at Prime Trust, told CoinDesk that it is fully audited and has relationships with such FDIC-insured institutions as U.S. Bank and Pacific Mercantile Bank. "If we're holding cash, it has to be FDIC-insured," he said.