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

According to the European Central Bank (ECB), some solutions could significantly improve cross-border payments, and Central Bank Digital Currencies (CBDC) could be the “Holy Grail”. In a new report, the eurozone monetary authority claims stablecoins are “problematic” among other options.

‘Holy Grail’ of Cross-Border Payments Through CBDC, Claimed by European Central Bank

Cross-border payments should be made instantly, cheaply, universally and through secure media, the European Central Bank said in a recently published report. reportIn a recently published paper, regulators have called such deals the “holy grail” thanks to falling data transfer costs, the birth of innovative concepts and global collaborations aimed at enhancing these payments. ‘ is within reach for the first time.

This review, co-authored by Ulrich Bindseil, ECB Director for Market Infrastructures and Payments, and economist George Pantelopoulos, explores different ways to achieve these objectives. Experts evaluated several currently available alternatives, including cryptocurrencies such as Bitcoin, stablecoins, modernized correspondent banking, fintech solutions and central bank-issued digital currencies. CBDCs.

Of these, Bitcoin is unlikely to become the “holy grail” of cross-border payments because it is “the least reliable,” they said, citing three main reasons for their conclusion. proof of work mechanisms, comparative advantages stemming from regulatory gaps that allegedly undermine anti-money laundering regulations, and the unsuitability of leading cryptos as domestic payment instruments because they are “intrinsically unstable” in terms of purchasing power.

Stablecoins are in the middle, but the adoption of closed-loop solutions, market power, and fragmentation could make them even “more problematic,” the report notes. Currency substitution and threats to currency sovereignty were also cited as risks. Nonetheless, the authors acknowledge that it can be efficient as a means of payment for several reasons, such as its stable value tied to existing fiat currencies and its potential to have universal reach. increase.

The other two solutions advocated by the European Central Bank combine technical feasibility and relative simplicity while avoiding dominance by a small number of market participants who ultimately abuse market power. , to maintain a competitive and open architecture. The central bank believes that

Domestic real-time payment systems and future CBDC interlinks, both with competitive FX conversion layers, are most likely to become the holy grail of larger cross-border payment corridors there is.

All reviewed options need progress in the following areas: AML/CFT compliance. The ECB says this will ensure straight-through processing of the majority of cross-border payments. The central bank raises the question of whether monetary authorities should develop cross-links between domestic payment systems and CBDCs, or dismiss one or the other and “concentrate all efforts to achieve the Holy Grail as soon as possible”. doing.

The European Central Bank is working on a project to issue a digital version of the common European currency, the euro.this is investigation stage President Christine Lagarde, it may take another year indicated last month. In an article co-authored with her director Fabio Panetta, she also mentioned the key principles of her CBDC realization.Then a group of economists was suggested Restricting user access to future currencies is necessary to maintain the current banking system.

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

Lubomir Tasev

Lubomir Tasev, a tech-savvy journalist from Eastern Europe, loves what Hitchens says. In addition to cryptocurrencies, blockchain and fintech, international politics and economics are sources of inspiration.