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Why Facebook Chose Stablecoins as Its Path to Crypto

Not so untraditional.

Not so untraditional.

Photographer: Akos Stiller/Bloomberg
Updated on

When Facebook Inc. developed Libra, its planned digital currency, it decided to focus on one version of the crypto world known as stablecoins. They’re not the biggest or best-known players in the field pioneered by Bitcoin. But to the broad range of companies partnering with Facebook on Libra, stablecoins seem promising as a possible bridge between the existing world of government-issued money and a crypto-based future. In particular, stablecoins are getting attention from banks like JPMorgan Chase Inc. as well as Facebook because they address one of the biggest hurdles facing digital currencies: their extreme volatility.

Bitcoin once dropped from nearly $20,000 to around $6,000 in four months -- a range of price swings that makes it nearly unusable for real-life transactions. Other digital assets like Ether or Litecoin have seen similar swings. Stablecoins, by contrast, are designed to hold their value. The price of the best-known stablecoin, Tether, has been at or close to $1 since 2015.