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Why (Almost) Everybody Hates Facebook’s Cryptocurrency Libra

Bloomberg business news
Trump, Democrats Unite in Distrust of Facebook's Libra Proposal

Facebook Inc. says its mission is to “bring the world closer together.” Its plans to launch a digital currency called Libra have succeeded in uniting central bankers and financial regulators from around the globe, along with U.S. President Donald Trump and his Democratic opponents in Congress. They’re dubious about the idea, at best. But Facebook isn’t alone in pursuing what is known as a “stable coin,” a form of cryptocurrency that so far has proved far more boring than, say Bitcoin. While some regulators are reacting to the idea that Facebook could leverage its 2 billion users to create a de facto global currency, other industry analysts wonder whether stable coins like Libra will find any widespread use at all.

Digital currencies designed to avoid one of the biggest problems facing cryptocurrencies: their 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. Many stable coins peg their value to that of another asset with far lower volatility, like the U.S. dollar or a basket of national currencies or commodities. Their issuers back up the value of their coin by holding on to that asset. The most popular stable coin to date, Tether, says it maintains a reserve of dollars; its price has varied only by a few cents.