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An executive board member at the European Central Bank, Yves Mersch, discussed bitcoin and its characteristics during his speech at Cash Symposium 2014.
The European Central Bank (ECB) does not believe digital currencies such as bitcoin have any threat to the euro.
Yves Mersch, an executive board member at the ECB said during his speech at Cash Symposium 2014 that bitcoin is inferior to euro as a payment system and a store of value.
The event, which took place in Frankfurt on the 19th of May, was held by Germany’s central bank called Bundesbank.
During his talk Mersch concentrated on euro, its benefits and main features as a payment system.
When speaking about the digital currencies as an emerging payment method, Mersch noted that they attract more customers due to the lack of transaction fees.
He said: “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.”
Still, Mersch added that “exchange rate losses can quickly cancel out this advantage.” This feature makes bitcoin a poor substitute to euro.
Although creating a wallet and buying digital currency doesn’t present many difficulties, a lot of people can’t totally understand how bitcoin works. It is due to the legal and security problems the bitcoin market has.
The lack of consumer insight could provoke more risks. Mersch said: “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.”
He also stated that in comparison with bitcoin, euro banknotes have “a modern design and the latest security features”.
Mersch considers that bitcoin is rather a regional currency than a global payment system. He added that there are about 2 million bitcoin users in the world and only a few businesses and establishments that accept the virtual money. The payment companies that accept bitcoin stated they have about tens of thousands of merchant and organization customers.
Mersch called bitcoin a “regional currency of the Internet” given the number of participants and the network size.
The statements of European Central Bank officials reflect comments made earlier this year.
In March, Mersch gave a speech at the ECB/Banca d’Italia Workshop on Interchange Fees where he said that bitcoin is too small to have an influence on retail and banking payments.
At that time he didn’t comment on the future of the virtual currency and its role as global payment system.