Recently, the European Central Bank (ECB) came to the conclusion that there is a better alternative to using Bitcoin or stablecoins in regard to cross-border payments. They realized that Central Bank Digital Currencies (CBDC) would be much cheaper and much more effective, calling it the “holy grail” of cross-border payments.
The report that was issued on this topic and co-authored by Ulrich Bindseil, the director-general for market infrastructure and payments, said:
“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.”
Ever since March of this year, the average global cost to send money over borders has been 6.09% of the total price, sometimes even rising up to 20%. In the report, it was stated that bitcoin was “inherently unstable in terms of its purchasing power” and that its proof-of-work consensus mechanism was “inherently inefficient”.
Eventually, a 59-page central bank report was issued, claiming that a CBDC would be the best route to follow as bitcoin was ruled out as inefficient and the rest of the stablecoins would pose an even less favorable alternative because of their “closed loop” systems. The CBDC would need to be monitored by central banks like the European Central Bank.
We do not know why the issue of cross-border payments was suddenly taken up after being set aside for so long. However, there have always been four main challenges: high costs, low speed, limited access, and insufficient transparency. The ECB is not only hopeful but also quite sure that a CBDC represents the solution to this long-lasting game.