Fun

CBDC Could Be ‘Holy Grail’ of Cross-Border Payments, ECB Says, Sees Bitcoin as Less Credible

News Feed - 2022-08-04 04:08:34

CBDC Could Be ‘Holy Grail’ of Cross-Border Payments, ECB Says, Sees Bitcoin as Less Credible


Several solutions can potentially improve cross-border payments significantly and central bank digital currency (CBDC) could be the “holy grail,” according to the European Central Bank (ECB). In a new report, the eurozone’s monetary authority also claims stablecoins, among other options, are “problematic.” ‘Holy Grail’ of Cross-Border Payments in Reach Through CBDC, European Central Bank Insists


Cross-border payments should be immediate, cheap, universal, and settled in a secure medium, the European Central Bank remarks in a recently published report. For the first time, the “holy grail” of such transactions is within reach, thanks to declining data transfer costs, the birth of innovative concepts, and global collaboration aiming to enhance these payments, the regulator says in the recently published paper.


The review, co-authored by ECB’s Director-General for Market Infrastructure and Payments Ulrich Bindseil and economist George Pantelopoulos, explores various ways to achieve these objectives. The experts have assessed several alternatives that are currently available, including cryptocurrencies like bitcoin, stablecoins, modernized correspondent banking, fintech solutions, and digital currencies issued by central banks, or CBDCs.


Of these, bitcoin is the “least credible” and hence unlikely to be the “holy grail” of cross-border payments, they say, pointing to three main reasons for their conclusion: an inefficient proof-of-work mechanism, comparative advantages resulting from regulatory gaps that will be closed by authorities as they allegedly undermine anti-money laundering regulations, and the leading crypto’s unsuitability as a means of domestic payment as it’s “inherently unstable” in terms of purchasing power.


Stablecoins, although they take an intermediate spot, can be even “more problematic” due to the employment of closed-loop solutions, their market power and fragmentation, the report notes. Currency substitution and the threat to monetary sovereignty have been listed as risks, too. Nevertheless, the authors admit they can be efficient as means of payment for several reasons, including their stable value bound to existing fiat currencies and their potential to have universal reach.


Two other solutions, the European Central Bank insists, combine technical feasibility and relative simplicity while maintaining a competitive and open architecture by avoiding the dominance of a small number of market participants who would eventually exploit their market power. The central bank believes these are: The interlinking of domestic instant payment systems and future CBDCs, both with a competitive FX conversion layer, which may have the highest potential to deliver the holy grail for larger cross border payment corridors.


All reviewed options require that progress is made in the field of AML/CFT compliance. The ECB says this will ensure straight-through-processing for the large majority of cross-border payments. The central bank raises the question whether financial authorities should develop both the interlinking of domestic payment systems and CBDCs, or dismiss one of them and “focus all efforts to implement the holy grail as soon as possible.”


The European Central Bank has been working on a project to issue a digital version of the common European currency, the euro. Its investigation phase may take another year or so, President Christine Lagarde indicated last month. In an article co-authored with Board Member Fabio Panetta, she also marked key principles of the CBDC’s realization. Then, a group of economists suggested that limiting users’ access to the upcoming currency is necessary to preserve the current banking system. Tags in this story assessment, CBDC, cross-border payments, Digital Currency, digital euro, ECB, economists, Euro, Europe, european, European Central Bank, means of payment, Payments, report


Do you agree with the ECB that central bank digital currencies can be the “holy grail” of cross-border payments? Let us know in the comments section below. Lubomir Tassev


Lubomir Tassev is a journalist from tech-savvy Eastern Europe who likes Hitchens’s quote: “Being a writer is what I am, rather than what I do.” Besides crypto, blockchain and fintech, international politics and economics are two other sources of inspiration. Israel Prohibits Cash Deals for Amounts Starting as Low as $1,700 FINANCE | 5 days ago ECB Economists Suggest Limiting Access to Digital Euro to Protect Banks FINANCE | 5 days ago


Image Credits: Shutterstock, Pixabay, Wiki Commons Previous articleENS Domain Registrations Skyrocketed Last Month, Total Names Created Nears 2 Million Disclaimer: This article is for informational purposes only. It is not a direct offer or solicitation of an offer to buy or sell, or a recommendation or endorsement of any products, services, or companies. Bitcoin.com does not provide investment, tax, legal, or accounting advice. Neither the company nor the author is responsible, directly or indirectly, for any damage or loss caused or alleged to be caused by or in connection with the use of or reliance on any content, goods or services mentioned in this article. Read disclaimerShow comments More Popular NewsIn Case You Missed ItTony Hawk"s Latest NFTs to Come With Signed Physical Skateboards


Last December, the renowned professional skateboarder Tony Hawk released his “Last Trick” non-fungible token (NFT) collection via the NFT marketplace Autograph. Next week, Hawk will be auctioning the skateboards he used during his last tricks, and each of the NFTs ... read more.Following a Brief Fee Spike, Gas Prices to Move Ethereum Drop 76% in 12 Days Today"s Top Ethereum and Bitcoin Mining Devices Continue to Rake in Profits Fidelity Investments Launches Crypto, Metaverse ETFs — Says "We Continue to See Demand" Bill ‘On Digital Currency’ Caps Crypto Investments for Russians, Opens Door for Payments

News Feed

Israeli Startup Chain Reaction Raises $70 Million to Build Blockchain Silicon
Israeli Startup Chain Reaction Raises $70 Million to Build Blockchain Silicon Chain Reaction, a Tel Aviv-based blockchain startup, announced it has raised $70 million as part of it
Visa, Mastercard Monitor Binance’s Regulatory Compliance as More Regulators Scrutinize the Crypto Exchange
Visa, Mastercard Monitor Binance"s Regulatory Compliance as More Regulators Scrutinize the Crypto Exchange Payments giants Visa and Mastercard say they are monit
Ethereum To $3,400? On-Chain Shows No Big Hurdles Ahead
Reason to trust Strict editorial policy that focuses on accuracy, relevance, and impartiality Created by industry experts and meticulously reviewed The highest standards in reporting and pu
RBI Begins First Retail Digital Rupee Pilot in 13 Indian Cities With 8 Banks
RBI Begins First Retail Digital Rupee Pilot in 13 Indian Cities With 8 Banks India’s central bank, the Reserve Bank of India (RBI), is launching its first retail digital rupe
HistoryDAO’s Mission to Take History From the Victors and Give It to the Masses
HistoryDAO’s Mission to Take History From the Victors and Give It to the Masses sponsored Humans have sought to preserve memories since prehistoric times, etching images into cave
Bitcoin Gold 51% Attacked – Network Loses $70,000 in Double Spends
Bitcoin Gold 51% Attacked - Network Loses $70,000 in Double Spends The Bitcoin Gold (BTG) network suffered another set of 51% attacks on January 23-24, as roughly 29 blocks were
Argentinian Chamber of Fintech Makes Cryptocurrency Regulation Proposal
Argentinian Chamber of Fintech Makes Cryptocurrency Regulation Proposal The Argentinian Chamber of Fintech, a membership-based organization whose goal is to lead the digitization a
Biggest Movers: AVAX, ALGO Among Crypto Losers as U.S. Inflation Hits 40-Year High
Biggest Movers: AVAX, ALGO Among Crypto Losers as U.S. Inflation Hits 40-Year High AVAX and ALGO both fell by nearly 10% on Friday, following the release of the latest inflation fi
Goldman Sachs Predicts Bitcoin Could Reach $100K as BTC Continues to Take Gold’s Market Share as Store of Value
Goldman Sachs Predicts Bitcoin Could Reach $100K as BTC Continues to Take Gold"s Market Share as Store of Value Goldman Sachs has predicted that the price of bitcoin could reach $1
Report: Gas Giant Exxon Is Running a Gas-to-Bitcoin Mining Pilot Program in North Dakota
Report: Gas Giant Exxon Is Running a Gas-to-Bitcoin Mining Pilot Program in North Dakota Exxon Mobil Corporation is reportedly participating in a pilot program that leverages exces
XRP Price Eyes Bullish Flag Breakout That Could Put 50% Gains On The Board
Este artículo también está disponible en español. Despite recent declines and volatility, a crypto analyst has declared that the XRP priceis on the cusp of breaking out o
Major South Korean Bank Prepares to Launch Crypto Services as Government Green-Lights Regulation
Major South Korean Bank Prepares to Launch Crypto Services as Government Green-Lights Regulation Following the approval of a regulatory framework for cryptocurrencies by the Sout