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Citi global head of digital strategy voices bitcoin scepticism

27 January 2015  |  8228 views  |  0 Citi digital

Speaking today at Citi's annual Digital Money Symposium event, Greg Baxter, global head of digital strategy at the US money centre bank, questioned the long-term economic viability of bitcoin as a global currency.

Sitting alongside Bob Ferguson, head of department, policy, risk and research at the FCA and Jon Matonis, founding director of the Bitcoin Foundation, Baxter said of bitcoin's economics: "People are paid a percentage of the value of the currency for mining - what happens when you hit the limit and those people no longer want to mine because there's no economic incentive? Nothing underpins the economics of it. The system we currently have is extremely low cost."

The recent slump in the value of bitcoin caused a number of coin-mining firms to suspend services or switch focus as the economic incentives behind the business hit the skids. This has been exemplified today by the slide into bankruptcy of US miner CoinTerra.

Says Baxter: "If you take all the bitcoin transaction values last year - Citi did that value in three hours of trading - the maturity of it isn't quite there yet and I can't see the economics stacking up."

As the discussion moved on to the peer-to-peer lending market, Baxter quipped: "Finally, now we're talking about products that mean something."

Giles Andrews, CEO and co-founder of Zopa, who was also part of the panel adds: "I don't think it is the currency that is interesting but the blockchain - I'm interested to see what the blockchain can do to banking core systems and accounting in general."

In June, Citi GPS, a publication owned by the group, published a report asserting that bitcoin could challenge or replace traditional payment services if adoption increases but went on to state that the security risks and price volatility could prevent it from being accepted.

Speaking to Finextra at last year's event, Baxter said of bitcoin: "At the moment bitcoin is acting more like a commodity - that undermines its value as a currency."

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