08 February 2016

Bitcoin not a threat to banking system...yet

20 May 2014  |  7718 views  |  0 bitcoin

Bitcoin is still more of a curiosity than a threat to the banking system but in the long term the crypto-currency could have a pronounced impact on payments, according to a group of advisers to the US Federal Reserve.

Bitcoin and its potential threat to the banking system, economic activity and financial stability came up at the most recent quarterly meeting between the Federal Advisory Council (FAC) and the Fed's board of governors, minutes (PDF) show.

When it comes to the banking system, the meeting concluded that bitcoin poses no near-term threat thanks to its tiny share of the global payments market and the challenges it faces - such as security concerns - in driving adoption.

In the longer term, however, the group say that the crypto-currency's low transaction fees, fast settlement and geographic flexibility could see it pose a real threat to traditional players, especially in developing markets.

Payment processors will need to adapt to bitcoin while banks could take advantage by becoming more involved in fund flows, especially as multicurrency accounts proliferate and reputational concerns subside.

The bankers also see potential benefits for merchants, which could ride the wave of a bitcoin boon. The currency should open new markets to sellers while capital flows will be driven from the developed to the developing world, increasing consumption.

As for bitcoin's impact on broader financial stability, the meeting concluded that while there are concerns over volatility and security, these do not pose a wider threat.

On regulation, bitcoin exchanges should be made to ensure that they protect customer funds and strong anti-money laundering rules should be in place. The meeting participants also warned of the dangers of balkanization, urging a consistent regulatory approach across geographic areas.

Comments: (0)

Comment on this story (membership required)
Log in to receive notifications when someone posts a comment

Finextra news in your inbox

For Finextra's free daily newsletter, breaking news flashes and weekly jobs board, sign up now.

Related blogs

Create a blog about this story (membership required)

Related stories

16 May, 2014
08 May, 2014
17 April, 2014
26 March, 2014
13 March, 2014
12 March, 2014
24 February, 2014
11 November, 2013

Related company news


Top topics

Most viewed Most shared
Fintech rising: Resistance is futile, says...
11216 views comments | 50 tweets | 42 linkedin
Digital transformation driving earnings at...
9487 views comments | 46 tweets | 36 linkedin
ECB eyes up European P2P payments
7836 views comments | 28 tweets | 39 linkedin
Visa opens up to developers
7792 views comments | 23 tweets | 41 linkedin
It may take ten years, but blockchain tech...
6502 views comments | 20 tweets | 19 linkedin

Featured job

to $120K base, double OTE, benefits
New York City, NY or Boston, MA (USA)

Find your next job