Citibank – No Payment Networks Will Be Disrupted By Bitcoin

CitiBank Research Bitcoin

According to the 56-page report released by Citi Bank Research, it has been made clear that Bitcoin won’t cause any disruption among banks or credit card networks. The report also notes the growth made by Bitcoin mobile apps as well as talks about Ripple and Ethereum and the government-backed digital currencies.

Citi believes that digital currency holds promise for financial services and also that the government-backed digital currencies can disrupt the existing payment systems, though they remain in an infant developmental stage and can face a lot of uncertainties.

Some key points from the report worth mentioning are:

  1. The reports claims that a decentralized payment system will be having limited benefits as compared to domestic networks in developing nations. It also claims that the best use for the blockchain technology is where numerous parties must share information during transactions.
  2. It is believed that the current centralized systems are superior in the areas related to settlement, messaging and regulations. The report also states how there has been a misperception of bitcoin being frictionless. Right now the transaction costs are negligible but with time they will only increase.
  3. City believes that the digital currencies have the capability to improve the settlement speed, but It requires widespread acceptance which is highly unlikely. Scalability, resiliency and regulations are some of the factors which are making it highly unlikely.
  4. City also believes that new models can be developed using networks like bitcoin and combining them with machine learning, Internet of Things, big data etc. This new model can be made to support programmable money, boost the efficiency of your computer in exchange of money to reduce machine idleness.
  5. The report also talks about two of the digital currencies that are not so well established, Ripple and Ethereum.

Ripple has been making attempts to eliminate mining, which is energy intensive. Instead of mining, they will use consensus which is a way for the transactions to agree on the same ledger. The transactions made through Ripple are faster than Bitcoin’s. Ether is a digital currency used by Ethereum network to function by giving incentives to the machines processing the smart contract. Its mining mechanism is planned to be changed in 2017.

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