A recent study conducted by the European Central Bank (ECB) on identifying the ultimate cross-border payment medium identified central bank digital currencies as winners over competitors such as banks, Bitcoin (BTC) and stablecoins. (CBDC) was selected.
The ECB’s interest in identifying the best cross-border payment solutions stems from the fact that it serves as the central bank of the 19 EU member states that have adopted the euro. increase. A study titled “Towards the Holy Grail of Cross-Border Payments” calls Bitcoin the most prominent unbacked crypto asset.
The EBC’s opinion that Bitcoin as a cross-border payment system is not good results in a highly volatile asset settlement mechanism, adding:
“Because payments on the Bitcoin network only occur about every 10 minutes, the valuation effect is already realized at the moment of payment, making Bitcoin payments actually more complex.”
The study highlighted Bitcoin-specific scaling and speed issues, but did not consider timely upgrades (Taproot and Lightning Network) that improve network performance. Essentially expensive and wasteful. ”
On the other hand, the ECB has recognized that CBDC is more suitable for cross-border payments due to its greater compatibility with foreign exchange (FX) conversion. His two main advantages highlighted in this regard are the preservation of monetary sovereignty and the ease of immediate payments by intermediaries such as central banks.
In contrast to the ECB’s reliance on CBDCs, Australian central bank governor Phillip Lowe believes private solutions for cryptocurrencies “will be better” as long as regulation reduces risk. .
Mitigating the risks associated with crypto adoption can be avoided through strong regulation and state support, Low said, adding:
“If these tokens are to be widely used by the community, they should be backed or regulated by the state, much like they regulate bank deposits.”
In Lowe’s view, private companies are “better than central banks at innovating” on the best features of cryptocurrencies.
