ECB chose CBDC as a better choice over Bitcoin for cross-border payments

In a recent study on choosing the best cross-border payment method, the ECB declared CBDC the winner over Bitcoin.
In a recent study on choosing the best cross-border payment method, the ECB declared CBDC the winner over Bitcoin.

In a recent study on choosing the best cross-border payment method, the European Central Bank (ECB) declared central bank digital currencies (CBDCs) the winner over rivals, including banking, Bitcoin (BTC), and stablecoins, among others.

Though the study titled “Towards The Holy Grail of Cross-border Payments” referred to BTC as the most prominent unbacked crypto asset, choosing CBDC clarifies the ECB’s positive stance toward blockchain technology. As it functions as the central bank for the 19 member states of the European Union that have embraced the euro, the ECB has an interest in determining the optimum cross-border payment option. The study found that BTC’s “underlying technology (and in particular its “proof-of-work” layer) is inherently expensive and wasteful,” along with its inherent scaling and speed issues. 

Moreover, ECB said that BTC fails when it comes to timely upgrades, Taproot, and Lightning Network to enhance the network performance. The central bank continued:

“Since the settlement in the BTC network occurs only around every 10 minutes, valuation effects are already materializing at the moment of settlement, making BTC payments actually more complicated.”

ECB believes CBDCs are better for crop-border payments

However, because of its superior compatibility with foreign exchange conversions, the ECB recognized CBDCs as a better choice for cross-border payments. The maintenance of monetary sovereignty and the simplicity of instant payments through intermediaries like central banks are two key benefits noted in this regard.

Notably, Europe is rushing to launch its CBDC, and as TheCoinRise reported in February, the European Commission has planned to bring the CBDC proposal in early 2023. Moreover, in March, Fabio Panetta, ECB’s executive board member, talked about the importance of online and physical stores accepting CBDC in the nation.

On the other hand, the Australian central bank Governor Phillip Lowe recently said that a private solution “is going to be better” for cryptocurrencies as long as they are regulated by solid laws and state backing.