Bitcoin’s economics are inherently flawed and it isn’t mature enough for mass adoption, according to Greg Baxter, Citi’s head of digital strategy.
“If you take all bitcoin transactions last year, we did [that much value] in three hours of trading. So I think the maturity of it — I don’t think it’s quite there yet,” Baxter said, speaking at a London event on digital money sponsored by Citi on Tuesday (Jan. 27), CoinDesk reported.
Baxter also pointed to bitcoin miners dropping out of the network as evidence that the cryptocurrency’s economics failed to “stack up.” “The real game is using digital to transform the core of our industry,” he said. Existing platforms “are low cost, they’re regulated, they’re trusted. Why wouldn’t you want to innovate on top of this platform?”
But efficiency isn’t everything, said Bitcoin Foundation founding director Jon Matonis, who was also on the Citi panel. “In a majority of use cases the centralized system is going to be far more efficient in doing a lot of things,” Matonis said. “The thing about distributed blockchain technology is you have to determine why you need it.” He also argued that the economics of Bitcoin will change with volume. “Transaction fees will replace miner rewards if there is sufficient commerce riding across the blockchain,” he said.
As for banks being regulated, there’s no reason cryptocurrencies can’t be regulated with a light hand, said Bob Ferguson, head of the Financial Conduct Authority’s Policy, Risk & Research Division.
“In the U.K., they might be regulated for [anti-money laundering] purposes, or they might not be regulated at all. We just have to wait and see,” he said, adding, “I don’t think banks are doomed to obsolescence, I think they will be able to adjust over time. They have legacy systems so they can’t transform themselves overnight. I think we’ll see innovation rather than extinction.”
But Giles Andrews, co-founder of peer-to-peer lending company Zopa, wasn’t so sure there was a place for digital currencies at banks — or a place for banks at all. “What can the blockchain do to banking’s core system?” he asked. “Building on what’s there and what works is a laudable aim, but so much of banking is simply broken. I think many would argue it’s not fit for purpose anymore.”