European Central Bank (ECB) executive board member Yves Mersch said during a speech on 19th May that as a payment system and a store of value, the euro is superior to digital alternatives like bitcoin.
Mersch was speaking at Cash Symposium 2014, a day-long event held in Frankfurt on 19th May by the Bundesbank, Germany’s central bank.
His talk focused on euro banknotes and their performance, and their characteristics as a system of payment.
Touching upon digital currencies as an emerging payment method, Mersch remarked that a lack of significant transaction fees makes them attractive to consumers, saying:
“Their special feature is that payments are made directly between the participants without a bank as an intermediary. The elimination of any bank charges achieved in this way is often claimed to be an advantage.”
However, he went on to say that “exchange rate losses can quickly cancel out this advantage”, a characteristic that he suggested makes it a poor alternative to the euro.
Security and legality
Mersch commented that the legal and security complexities in the bitcoin market make it difficult for consumers to completely understand the process, even though acquiring a wallet and purchasing digital currency is not inherently difficult.
This lack of consumer insight, Mersch stated, opens the door to greater risks, saying:
“Although interested parties can very easily download the application for bitcoin, they neither understand how this payment system works exactly, nor the risks they run when using it.”
By comparison, Mersch said that euro banknotes possess “a modern design and the latest security features”.
Regional currency
Notably, Mersch sought to identify bitcoin as a regional rather than a truly global payment system.
There are “probably a maximum of 2 million bitcoin users” within the broader network, he noted, and that “only a few thousand business and services providers which accept bitcoins” exist.
The latter figure runs counter to statements from payments companies in the bitcoin ecosystem that have claimed tens of thousands of merchant and organization customers.
Mersch said that bitcoin, owing to the size of its network and the fewer number of participants relative to traditional global payment networks, could be called a “regional currency of the Internet”.
Previous statements
The ECB official’s comments reflect earlier statements made in regards to bitcoin this year.
In March, Mersch spoke at the ECB/Banca d’Italia Workshop on Interchange Fees, where he suggested that bitcoin was “too small” to have an impact on banking or retail payments.
At the time, Mersch left the door open to the digital currency’s future role as a bigger payment system.
Mersch image via YouTube