Central bank digital currencies (CBDCs) have been found to be the best technology for international financial transactions.
The European Central Bank (ECB) presented the results of a study in which a comparative analysis of the leading technologies that can be used for cross-border payments was conducted. As a result, CBDCs turned out to be the best technical solution for the organization of international money transfers.
The main motivation for the research was the fact that the eurozone includes 19 countries, and the optimization of cross-border financial operations is one of the priorities for the ECB. That’s why the bank’s analysts compared several financial technologies, including Bitcoin, stablecoins, and classic banking services. However, CBDCs were found to be the optimal financial instrument.
The main advantages of the central bank digital currency in the context of cross-border transfers include:
- the possibility of conversion in the foreign exchange market;
- preservation of monetary sovereignty;
- ease and speed of payments through intermediaries.
The report mentions the Bitcoin network as the best-known unsecured cryptocurrency asset. The use of BTC for cross-border transactions is limited due to its high volatility, transaction processing speed, and scaling issues.
Using Bitcoin’s “core technology,” particularly the Proof-of-Work consensus algorithm, is “expensive and wasteful,” according to analysts. We recall that European officials intended to completely ban cryptocurrencies based on PoW, however, ultimately, this rule was removed from the “cryptocurrency bill” Markets in Crypto-Assets (MiCA).
Concerning the introduction of the digital euro, representatives of the ECB have previously conducted research and found that most EU citizens are ready to adopt CBDCs. The ECB announced plans to introduce the digital euro by 2026. This reflects the general trend to explore and implement CBDCs, which central banks worldwide are doing. Major international financial institutions are calling for digital currencies to be designed, taking future interoperability into consideration.
