Spotify Explains Why It Is Backing Facebook's Libra Cryptocurrency

Ilya S. Savenok/Getty Images for Spotify
Founder and Chief Executive Officer of Spotify Daniel Ek speaks onstage during Spotify Investor Day at Spring Studios on March 15, 2018 in New York City. 

Spotify has signed on as an early backer of Facebook's planned cryptocurrency Libra, citing a "massive opportunity for simple, convenient, and safe payment over the internet" for the nearly 2 billion people worldwide without traditional access.

Facebook announced its ambitious plan on Tuesday to create a Bitcoin-like currency as a way of sending money across borders without incurring significant fees. The company believes Libra, scheduled to launch in the next 6-12 months, could help drive more e-commerce across its services and boost a spending.   

The music streaming service is one of two dozen partners helping to fund, build and govern the new currency system. Other founding members include Visa, eBay, PayPal, Uber, MasterCard -- who've all invested at least $10 million each into the project. According to Facebook, it won't actually control Libra, but instead will share governance with the other partners.

Explaining its decision to be back the venture early, Spotify said Libra has the potential to "empower billions of people" and, potentially, benefit rights holders by streamlining payments.

"One challenge for Spotify and its users around the world has been the lack of easily accessible payment systems – especially for those in financially underserved markets," said Alex Norström, Spotify's chief premium business officer. "This creates an enormous barrier to the bonds we work to foster between creators and their fans. In joining the Libra Association, there is an opportunity to better reach Spotify’s total addressable market, eliminate friction and enable payments in mass scale."

Facebook says Libra will be different than other, more well known cryptocurrencies in part because its value will be pegged to a basket of established currencies such as the U.S. dollar, the euro, the yen and others. Each purchase of Libra will be backed by a reserve fund of equal value held in real-world currencies to stabilize Libra's value.

Calibra, a new Facebook subsidiary, is developing a digital wallet to allow people to buy, send and use Libra.