European Central Bank orders banks to embrace instant payments to beat bitcoin

Banks should speed up the introduction of immediate payments, whereby money is received immediately and around the clock, to counter the allure of digital currencies such as bitcoin, said the European Central Bank (ECB).

“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,” said a member of the ECB’s executive board Yves Mersch as cited by Reuters.

Central banks are worried private digital currencies are threatening their control of the banking system and money supply. The regulators fear this could undermine the monetary policies they use to manage inflation.

At the same time, some central banks such as Sweden’s Riksbank and the Bank of England are considering introducing their own digital currency. The Riksbank may introduce the so-called e-krona soon to solve the problem of a dramatic drop in the domestic use of cash. The world’s oldest central bank was the first to issue paper banknotes in the 1660s.

According to Mersch, the ECB will experiment but does not see scope for “adventurous applications” of such technology.

“We shall also experiment with cash on different digital technologies,” Mersch said, adding “other adventurous applications of a more disruptive nature are simply not robust enough.”

Meanwhile, Bundesbank board member Carl-Ludwig Thiele said a digital currency such as Sweden’s proposed e-krona could not be introduced in Germany, where cash payments are still prevalent.

“The issue of digital central bank money is in our view not a realistic option for the foreseeable future,” said Thiele.

rt.com