ECB Warns Banks They Need to Compete With Cryptocurrencies
The European Central Bank (ECB) has called Bitcoin a bubble, a criminal risk and warned EU members states not to introduce their own versions. Now they’re calling it something else: a competitor to mainstream banking.
Though they warn investors off cryptocurrencies, there is increasing acknowledgment that technological innovation in the sector may be beneficial to everyone, particularly if it forces mainstream banks to increase their offerings to consumers.
In a speech yesterday ECB Executive Board member Yves Mersch pointed specifically to the need for banks to enable instantaneous payments.
Banks need to implement instant payments as soon as possible and provide an alternative narrative to the ongoing public debate on the alleged innovation brought by virtual currency schemes.”
One of the drivers of cryptocurrencies’ success is their ability to send payments much more quickly than banks, completing transfers in minutes rather than days. When these payments cross borders the differences are even greater, making cryptocurrencies particularly appealing for foreign workers sending home remittances.
Digital Cash Experiments
Mersch also announced that the ECB would be experimenting with some digital cash technology, but not to expect anything radical as,
other adventurous applications of a more disruptive nature are simply not robust enough.”
His remarks echo those of Vice Chair of the U.S. Federal Reserve Randal Quarles who said this week that though they were monitoring cryptocurrencies there was no plan to adopt “unproven technology”. He was cautious on the possibility of a central bank issued digital currency, stating that “extensive reviews and consultations” would be needed first. He added that he was particularly concerned about how digital currencies would behave “in times of stress”.