Spain's Central Bank: Bitcoin is Not an Effective Payment Method

Banco de España (BDE), Spain’s central financial institution, has released a report in which it noted that bitcoin (BTC) is not an effective medium-of-exchange (MoE).

Although BDE’s report did not consider the significant improvements in speed and cheaper cryptocurrency transactions now being facilitated by the Lightning Network (LN), the formal write-up mentioned that the Bitcoin network was unable to function as an efficient payment system. According to BDE, the decentralized nature of Bitcoin and the lack of third-parties to confirm transactions severely limits the cryptocurrency’s ability to facilitate mass value exchange.

Centralized Systems Are More Effective At Processing Payments

BDE’s 35-page report, titled (translated from Spanish) “Bitcoin: A solution for payment systems or a solution in search of a problem?”, stated that decentralization requires a “process of intensive validation [which] ... consumes [a lot] of resources, [thus] reducing system efficiency.”

Meanwhile, “centralized systems with an intermediary trusted by the parties allow the design of much simpler and cheaper [transaction] systems”, BDE’s report asserted.

The report’s author, Carlos Conesa, BDE’s deputy general director of financial innovation and market infrastructures, argued that proper payment systems should facilitate the transfer of funds between two parties in a quick, secure, and cost-effective manner. According to Conesa, the Bitcoin network cannot settle transactions efficiently.

In the report, Conesa also mentions that the Bitcoin network can only handle about 600,000 transactions per day - which is “insignificant” compared to the more established payment processors.

Although Bitcoin’s payment system may not be perfect, there are many analysts who believe the pseudonymous cryptocurrency is able to function as a MoE and also as a store of wealth. Clem Chambers, CEO of ADVFN.com, a financial website focused on helping private investors, recently explained why he thinks bitcoin is real money:

ADVFN.com CEO Says Bitfcoin Is "An Excellent Means Of Exchange"

Chambers revealed that he had “made a lot of money out of crypto” and that he “can tell you categorically that” bitcoin has all the essential properties, or characteristics, of money. He argued that bitcoin serves as “an excellent means of exchange” because users “can’t reverse a BTC payment like a payment by credit card.” By bringing finality to transactions, merchants that accept bitcoin don’t have to worry about receiving backcharges, months after they’ve already provided a service or product, Chambers explained.

Notably, the experienced financial professional pointed out that business-to-business (B2B) transactions involving fiat currencies can only be processed during business (or banking) hours. However, crypto transactions with BTC are available all the time, as Chambers remarked:

Bitcoin is 24/7/365, the banking system is not. The blockchain works weekends, holidays and evenings, like our international sales staff and our websites.

Nexo Co-Founder: Bitcoin Doubters Are Running Out Of Reasons

Michael LaVere
  • Nexo exec says bitcoin doubters are running out of reasons. 
  • The price of BTC broke $12,600 for the first time in over a year. 

Bitcoin doubters are running out of steam in 2019, especially as the price of BTC trends towards new highs. 

No Longer Doubting Bitcoin

Antoni Trenchev, co-founder and managing partner of cryptocurrency lending startup Nexo, appeared on CNBC  onJune 25 to take aim at bitcoin detractors. In the interview, Trenchev explained that bitcoin has been declared dead more than 300 times, with 90 occasions occurring in the past year. 

Nexo Antoni Trenchev Bitcoin DoubtersAntoni Trenchev appeared on CNBC to discuss bitcoin's price rally | Source: CNBC

Crypto bears such as Warren Buffett and Peter Schiff have continued to call for the demise of bitcoin, despite the price trading above $11,000. Trenchev declared that bitcoin “has risen from the ashes yet again.”

He continued, 

“I think, you know, the doubters are having a really hard time continuing their cause.”

Institutional Interest In Cryptocurrency

Trenchev gave his reasons for the increased rise in bitcoin price. He highlighted institutional participation, including the launch of JP Morgan’s JPMCoin pilot at the end of the year. Geopolitical turmoil has also been favorable for the price of bitcoin. 

In early April, concerns over Brexit sparked the initial rally which saw bitcoin jump above $4,000. More recently, deteriorating US-China and US-Mexico trade relations have led to anxiety in the stock market. With President Trump now threatening sanctions against Iran, bitcoin is becoming a favorable digital asset for investors fleeing traditional markets. 

Set For New Heights in 2019

Despite crypto proponents losing confidence during last year’s bear market, Trenchev believes skepticism is shifting towards current bitcoin detractors. 

He told CNBC, 

“[During] the bear market of 2018, we’ve seen even the harshest proponents turning skeptical at some point, and this usually is the inflection point from which, you know, assets start rallying again, but I think it is really about institutional support and implications that it has in terms of mass adoption.”

Trenchev also gave a nod to Facebook’s Libra. While Facebook has created a storm of global regulatory concern over Libra, the digital currency has driven new interest into cryptoassets -- even if bitcoin's price was already on the rise. 

In all, Nexo’s co-founder believes it is more difficult to doubt bitcoin in 2019. The landscape for crypto has shifted since last year’s market collapse, which will provide a springboard for adoption and price.