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Why Facebook Chose Stablecoins as Its Path to Crypto

Not so untraditional.

Not so untraditional.

Photographer: Akos Stiller/Bloomberg
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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.