‘Crypto stablecoins may face bottlenecks’

Stablecoins, a fast-growing subset of cryptocurrencies designed to avoid the large fluctuations of Bitcoin and Ether, could fail to function properly in periods of stress, according to JPMorgan Chase & Co.

While the total value of all stablecoins is less than $5 billion, the lowvolatility tokens are poised for rapid growth, and none more so than the Libra coin developed by Facebook Inc, said the analysts led by Joshua Younger. Yet they are vulnerable to bottlenecks and seizures because they lack the same shortterm liquidity facilities common in other payments systems, meaning there's a risk that activity in the coins will grow faster than the currency can safely support.

“Stablecoins, and Libra in particular, have the potential to grow substantially and ultimately shoulder a significant fraction of global transactional activity,” the analysts said in a note to clients on Thursday. Another danger facing Libra, which Facebook plans to launch next year in partnership with a diverse group of corporate and charitable partners, is negative yields, the analysts said.