Crypto legislation continues to be a central theme of the industry right now, especially in the European and U.S. markets. As the market continue to grow in these areas, the U.S. and the European Union (EU) are looking into ways not only to protect investors but to make using money even easier with blockchain technology. One facet of particular interest globally is that of crypto’s use for cross-border payments. The idea of using crypto to send international remittances is a highly appealing one. But, some European banking experts say crypto is not in good enough shape for the endeavor to remain worthwhile. Let’s take a look at the latest crypto news.
The EU has been particularly studious in its crypto legislation efforts. The committee of nations has launched a number of different studies in order to best understand the ways in which investors can be affected — both positively and negatively — with the ubiquity of cryptocurrency. This efforts has produced the sizable package of crypto infrastructure laws passed in early July.
Continuing these efforts, the European Central Bank (ECB) has come out with another study aiming specifically at cross-border payments. With the growing interest in cryptos like Ripple (XRP-USD), more and more crypto investors are looking to the DeFi space as an alternative to international payments through banks. These projects offer far lower fees than those required of traditional wire transfers, for one. Ripple, as a leader in this space, also has a leg up as an ISO 20022-compliant project. ISO 20022 is a banking language standard that is rapidly becoming the universally accepted method for bank-to-bank communication. Crypto’s foray into this world gives it yet another reason to be a viable alternative to bank transfers.
Crypto News: ECB Cautious About Using Many Cryptos for Cross-Border Payments
Today’s government crypto news focuses on the ECB’s report on international money transfers. Many laud the space as the solution to existing red tape. However, the bank makes clear that not all cryptos are cut out for the job.
The EU banking regulator’s study ranks cryptos least fit to be an alternative to fiat transfers. Unsurprising to all but the most faithful Bitcoin (BTC-USD) maximalists, the report says BTC is of the worst cross-border payment alternatives to adopt on a wide scale. This is due largely to its proof-of-work consensus mechanism. The EU has demonstrated through its infrastructure bill that it doesn’t support cryptos using the energy-intensive consensus method.
More surprising to investors is the ECB’s lack of faith in stablecoins as a viable wire-transfer currency. The reason behind this is due to reserves. Regulators don’t seem to trust currencies that underlie themselves with other assets as reserves. The report argues that adopting these stablecoins as a standard would give private companies too much market power. As CoinDesk reports, the scrutiny over these cross-border payments stems from the rise in private sector stablecoin initiatives like that of Meta Platforms’ (NASDAQ:META) failed Diem venture.
But while options like Ripple exist — and have made themselves known exactly for their cross-border payment uses — the ECB is turning to a different, much more centralized solution. Indeed, the report comes to the conclusion that Central Bank Digital Currencies (CBDCs) are the best option. This is the most obvious conclusion that a central bank can come to, of course. Though, it admits that with a lack of CBDCs currently, we could be a ways away from seeing traditional transfers phased out.
On the date of publication, Brenden Rearick did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.