Monday 1 March 2021 1:57 pm

Citi report says Bitcoin could be the future of finance

Multinational investment bank Citi has suggested Bitcoin could become the currency of choice for international trade if it overcomes a critical “tipping point”.

Referring to recent support from big names like Mastercard and Tesla, Citi says the market-leading crypto stands on the brink of a huge transformation into mainstream finance.

“In this scenario, Bitcoin may be optimally positioned to become the preferred currency for global trade,” the report – headed by Citi’s Sandy Kaul – stated.

“It is immune from both fiscal and monetary policy, avoids the need for cross-border foreign exchange transactions, enables near instantaneous payments, and eliminates concerns about defaults or cancellations as the coins must be in the payer’s wallet before the transaction is initiated.”

The news seemingly triggered a turn in fortune for cryptocurrency markets which were slipping away from recent highs that saw Bitcoin peak at more than $58,000 on February 1 before a brace of severe slumps landed hard on $43,000 over the weekend. The 12-year-old digital asset has been boosted by $5,000 since Citi released its dossier.

However, while the 100-page report’s findings will be widely embraced by crypto evangelists, the analysis also comes with stark warnings. It says that if the tipping point does not push Bitcoin into the mainstream, it could face a serious “speculative implosion”.

Holding back

Highlighting a need for “obstacles and challenges” to be addressed, Citi stressed an urgent requirement for an upgrade in the way Bitcoin’s marketplace worked. The report’s authors hinted that many large corporations may be holding back as they required more certainty over guarantees of safety and market efficiency.

A desire for firm regulation was also raised, but the report adds this may drive away some innovative disruptors while attracting more establish businesses.

“Many of the most innovative and talented developers may choose to withdraw from established platforms deploying more extensive oversight and monitoring,” it said.

“This could end up dividing the liquidity in the system.

“Developments in the near term are likely to prove decisive, as the currency balances at the tipping point of mainstream acceptance or a speculative implosion.”