Latest from the European Central Bank (ECB) study When it comes to an ideal cross-border payment system, central bank digital currencies (CBDCs) claim to outperform other traditional banking instruments, including Bitcoin, stablecoins, and SWIFT.
ECB is not a fan of Bitcoin for international remittances
Entitled “Towards the Holy Grail of Cross-Border Payments,” the paper aims to help 19 euro-using European countries identify the best alternative cross-border payment solutions. I’m here.
A research paper called Bitcoin the world’s most “unbacked crypto asset,” and Bitcoin’s usefulness as a cross-border payment system has been undermined due to its poor payment mechanism and daily volatility. It adds that it is. Further notes from the author:
“Bitcoin has long-recognized scaling and speed issues. The underlying technology (particularly its “proof of work” layer) is inherently expensive and wasteful. Rather, decentralized trust-creation mechanisms that rely on “proof of work” to stabilize permissionless blockchains are either centralized (e.g. based on central bank money) or semi-centralized. have proven to be more expensive and less efficient than 1″
Furthermore, since payments within the Bitcoin network occur every 10 minutes, the paper states that real-time valuation effects can be very evident. However, the study acknowledges that recent upgrades such as Taproot and layer 2 scaling solutions such as Lightning Network are working to address these issues.
In contrast, the ECB sees CBDC as superior to Bitcoin as it offers seamless compatibility with foreign exchange exchanges. Not only that, but it also helps maintain currency sovereignty while offering extremely fast settlement times.
Australian central bank governor disagrees
In contrast to the ECB’s view on CBDC, Australian Central Bank Governor Philip Lowe believes privately-developed crypto solutions are “better” as long as the regulation avoids existing risks. Rowe said:
“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.”
He believes private companies can do a better job than any central bank at fostering innovation and bringing out the best in various cryptocurrencies.