“Libra is a global, digitally native, reserve-backed cryptocurrency built on the foundation of blockchain technology,” the company wrote on a new website dedicated to the rollout. “People will be able to send, receive, spend, and secure their money, enabling a more inclusive global financial system.”
The new currency is expected to be up and running in the next six to 12 months and will be run by a not-for-profit organization in Geneva, Switzerland. Unlike other cryptocurrencies, Facebook emphasized, Libra is backed by “a reserve of real assets,” with an equivalent amount of real currencies and assets held in reserve for every Libra that is created. Bitcoin and others have not gained widespread acceptance because of their fluctuations in value. Facebook hopes that by pegging Libra to the dollar the euro, the yen and other real currencies it will offer a more stable alternative with mainstream appeal.
Security measures aside, the move comes at a delicate time for Facebook, which is in the cross-hairs of regulators in the U.S. and Europe over its allegedly anti-competitive behavior, its use of data and the policing of its platform. The decision to create a new currency could potentially invite further regulatory scrutiny.
Facebook is handling the initial buildout of Libra. PayPal, Uber, Spotify, Visa and MasterCard are launch partners, and Facebook is looking to raise up to $1 billion from current and future partners to support the further development of the currency.
Advertising is never far from the picture when it comes to Facebook’s operations, and one potential outcome is many of the social network’s two billion active users being motivated to make purchases from advertisers due to the currency. “This is about fostering more sales within an ad to get more business from advertisers to make ads more interesting on Facebook,” Gartner analyst Avivah Litan told the Associated Press.