The headline of this brief piece posted in Cointelegraph will likely come as no surprise to most readers; the ECB is basically endorsing CBDCs over Bitcoin (among others) as a means of transferring value cross-border. Members will know that we recently released a research paper on the growing uses of cryptocurrencies in the B2B space. In that paper we point out that the BIS reports that as of 2021 14% of central banks in their purview were deploying a CBDC and 60% were experimenting with at least one form (this includes the U.S., which we have pointed out in these pages as well).
‘A recent study conducted by the European Central Bank (ECB) on identifying the ultimate cross-border payment medium crowned central bank digital currencies (CBDCs) as the winner against competitors, including banking, Bitcoin (BTC) and stablecoins, among others….ECB’s interest in identifying the best cross-border payment solution stems from the fact that it serves as the central bank of the 19 European Union countries which have adopted the euro. The study, “Towards The Holy Grail of Cross-border Payments,” referred to Bitcoin as the most prominent unbacked crypto asset….On the other hand, the ECB recognized CBDCs as a better fit for cross-border payments owing to greater compatibility with forex exchange (FX) conversions. Two major advantages highlighted in this regard are the preservation of monetary sovereignty and the ease of instant payments via intermediaries such as central banks.’
One of the biggest hurdles for Bitcoin is of course the relatively slow transaction settlement associated with the proof-of-work layer, which runs counter to the growing ‘need for speed’ in modern transaction processing. Interestingly enough, the article goes on to point out that a central bank governor in Australia has the opposite view, favoring private solutions. The subject is front and center so we’ll see more about this consistently over the next couple of years.
‘Contradicting the ECB’s reliance on CBDCs, Australian central bank Governor Phillip Lowe believed that a private solution “is going to be better” for cryptocurrency as long as risks are mitigated through regulation….Mitigating risks related to crypto adoption can be fended off by strong regulations and state backing, stated Lowe, adding:
“If these tokens are going to be used widely by the community, they are going to need to be backed by the state or regulated just as we regulate bank deposits.”
In Lowe’s view, private companies are “better than the central bank at innovating” the best features for cryptocurrency.’
Among commercial cards, Mercator Advisory Group sees development in crypto rewards and expanding crypto payments acceptance, while in treasury and trade, there are uses in cross-border payments, liquidity and cash management.
Overview by Steve Murphy, Director, Commercial and Enterprise Payments Advisory Service at Mercator Advisory Group.