Questions over cryptocurrency use for cross-border payments

Questions over cryptocurrency use for cross-border payments

African exchangers differ on why central banks don't report the use of Bitcoin, for example, for cross-border payments.

A Bank for International Settlement (BIS) report says cryptocurrencies like Bitcoin are rarely used for cross-border payments, but two African exchangers disagree with the view.

Questions about the use of cryptocurrencies for domestic and cross-border payments came up as the BIS looked into central bank digital currencies (CBDCs) as new variants of central bank money - different from physical cash or central bank reserve/settlement accounts.

The BIS says central banks are considering how CBDCs could replace traditional money, even though only a few of them have firm intentions to issue them in the next decade.

It adds that majority of central banks believe cryptocurrency use for cross-border payments will be minimal because of low retail acceptance, compliance issues and outright bans in some jurisdictions.

BIS adds that no central bank has reported "any significant or wider public use of cryptocurrencies for either domestic or cross-border payments in their jurisdictions" as at the end of 2018.

Recently, the Proceeding with caution – a survey on central bank digital currency' report was released and noted that the use of cryptocurrencies is assessed "to be either minimal ("trivial / no use") or concentrated in niche groups for a large majority of the responding central banks."

Thabang Mashiloane, CEO of Chankura exchange, said central banks may not have followed transaction flows as they are mostly done over-the-counter.

"I think most cryptocurrency transactions especially OTC orders aren't reported to central banks," he said. "We see massive order requests even in the United States where clients request for orders worth more than $200 million at once. However, most of the activity on cryptocurrency at the moment is people buying to hold for long term gains."

According to Eric Annan, CEO of KuBitX exchange, the BIS' claims could be to discourage interest in cryptocurrencies for threatening the current monopoly of the financial system.

"For the report, I see no value in it when we already know (that) the likes of Western Union, Visa, MasterCard are all working behind the scene to come up with alternative means of payment using blockchain-based digital assets. It's not a matter of if... it's a matter of when."

He maintains that like the war waged by establishments against the few innovative technologies in the 1990s and early 2000s, strong viable solutions like Bitcoin will survive especially as real use cases emerge and a regulatory framework is implemented.