The European Central Bank made their stance on March 13, suggesting bitcoin to be “not the answer to a cashless society,” and also discussed their uncertainty behind the relevance of bank-issued digital currencies.
Benoît Cœuré, ECB Board member, and Jacqueline Loh, chair of the BIS (Bank for International Settlements’) co-authored a paper, sighting that cryptocurrency manages to challenge traditional banking institutions because of the latter’s incompetence in areas of international remittance options for consumers.
The paper reads, “Despite its many faults, bitcoin has put the spotlight on an old failing of our current system: cross-border retail payments,[…]These payment channels are much slower, less transparent and way more expensive than domestic ones. Improvements here are the best way of rising to the bitcoin challenge.”
Daniele Nouy, the chair of ECB Supervisory Board, mentioned that bitcoin regulation is “not exactly very high on its to-do list” and that their involvement with cryptocurrency, in general, is to the minimum. However, the entire blockchain industry is still an area of major interest to the EU, with the “War on Cash” progressively getting heightened in member states like Sweden who have even demanded inclusivity.
But taking to the report, the two leading European policymakers argue that blockchain based tokens are rarely used to price goods, and hence they are a worthless means for making payments. In respect to its store value, cryptocurrency is like casino gambling.
However, the paper does acknowledge that cash won’t be king forever but states bitcoins and similar cryptocurrency to simply be a foreshadowing for the future cashless society.
The main reason why cash is still prevalent is because it is still the only form of currency backed by a central bank. Without cash, an economy would have to rely on the liquidity of commercial banks.
In response to this problem, the concept of central bank digital currencies or CBDCs has surfaced. However such a currency will not come with the same anonymity which cash does, and central banks will gain access to a huge chunk of personal information about individuals - which will be another problem.