coindesk.com
Bitcoin and global stablecoins are the worst of all options for cutting the cost and time associated with cross-border payments, a study published by the European Central Bank (ECB) Monday said.
Spurred by private-sector initiatives like the now defunct Facebook-backed Libra, regulators are looking at how to tighten up the clunky payments networks that can today leave people waiting days for their money – but central banks would rather they themselves were in the driving seat.
“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,” said the study, co-authored by ECB Director-General for Market Infrastructure and Payments Ulrich Bindseil.
“Bitcoin is least credible” of the visions to achieve that, the report continued, and stablecoins – cryptoassets that seek to tie their value to other assets such as fiat currencies – come in a close second given concerns over their market power.
The report says a bitcoin-based system wouldn’t work due to its “inherently inefficient” proof-of-work consensus mechanism, the “widespread” use for criminal purposes, and the volatility of the asset – while also describing the fervor of the cryptocurrency’s supporters as “quasi-religious.”
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There’s more mileage in linking together individual jurisdictions’ central bank-issued digital currencies, Bindseil reckons – though few of them yet exist.
Those developing central bank digital currencies (CBDCs) – presumably including the ECB, currently looking into the feasibility of a digital version of the euro – should “discuss at a relatively early stage the related interoperability issues” to ensure they can work together with other currency zones, the study said.
They should also try to make existing domestic instant-payment systems operate with each other – despite questions over how to vet dirty money, and deal with counterparties who might default, it added.
The ECB’s Executive Board member Fabio Panetta has previously called crypto a “Ponzi scheme" towards which regulators should be "less tolerant." The Bank for International Settlements, an association of major central banks from around the world, which previously revealed that nine in ten central banks are working on a CBDC, in July called for greater cooperation among them.