Once again Facebook is at the center of controversy, this time with its plans to introduce its own cryptocurrency, Libra. It must overcome four key challenges, however, and even then it is not clear what Facebook ultimately hopes to accomplish with this venture.

In my article two years ago, “What Advisors Need to Know About Cryptocurrencies,” I ended with these two sentences: “And watch this space. The fun may have only begun.” Well, the fun is continuing. Facebook’s recent Libra proposal has been met not only with excitement but with howls of dissent. By the time the dissenters have cut Facebook’s proposal down to size, it will not only be far less exotic, it will be better for the users Facebook aims to serve as well as for Facebook itself.

The Libra proposal: the basics

Facebook has proposed to launch a new cryptocurrency through a Switzerland-based not-for-profit called the Libra Association. The currency is to be backed by a reserve fund called the Libra Reserve, containing safe assets in a variety of major currencies, mainly short-term government securities.

The Libra Reserve will be funded by money from the purchases of Libra. For each purchase of Libra made with a fiat currency, such as the dollar or the euro or the yen, safe assets will be purchased by the Reserve in a designated basket of currencies in designated proportions.

The Libra Association is planned to consist of 100 members, each of which will have one vote and will contribute 10 million U.S. dollars to seed-fund the Reserve, in order to create the initial Libra and cover administrative costs. Association members will be compensated out of the interest earned on the reserve assets.

There are 27 Libra Association members so far, in addition to Facebook itself, including financial companies like Mastercard, Visa, and PayPal; technology, telecommunications, and cryptocurrency companies like eBay, Uber, Vodafone, and Coinbase; venture capital firms like Andreesen Horowitz and Union Square Ventures; and nonprofits like Mercy Corps, Kiva, and Women’s World Banking.