According to a report released by the European Central Bank (ECB) on Monday, bitcoin and stablecoins are the poorest alternatives available for reducing the time and cost involved with cross-border transfers.
Regulators are examining ways to tighten the cumbersome payments networks that sometimes make customers wait days for their money, spurred by private-sector projects like the now-defunct Facebook-backed Libra, but central banks would like to be in control themselves.
The study, which was co-authored by Ulrich Bindseil, the director-general for market infrastructure and payments at the European Central Bank, stated that the “holy grail of cross-border payments is a solution allowing cross-border payments to be immediate, cheap, universal, and settled in a secure settlement medium.”
According to the survey, stablecoins—crypto assets that aim to link their value to other assets like fiat currencies—come in second place, with Bitcoin coming in last due to worries about its market dominance.
According to the paper, a bitcoin-based system wouldn’t function because to the “inherently inefficient” proof-of-work consensus process, the asset’s volatility, and the “widespread” usage for illegal activities. Additionally, it labeled the zeal of bitcoin backers as “quasi-religious.”
Central bank-issued digital currencies (CBDCs) from various countries can be linked together more effectively, according to Bindseil. though there aren’t many CBDCs currently.
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The report recommended that those creating CBDCs “address at a reasonably early stage the underlying interoperability challenges” to guarantee they can cooperate with other currency zones. Presumably, this includes the ECB, which is mulling a digital euro.
Despite concerns about how to verify dirty money and handle counterparties who could default, they should also aim to make the existing domestic instant-payment systems work together, it continued.
ECB executive board member Fabio Panetta has previously referred to cryptocurrency as a “Ponzi scheme” that authorities should be “least tolerant” of. The Bank for International Settlements, a grouping of significant central banks that has previously disclosed that 90% of central banks are engaged in CBDC development, asked for stronger bank collaboration in July.
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