Banking group sceptical about bitcoin's future, calling currency 'inherently fragile'
Market dominated by speculators rather than users, making price volatile, report says
The online currency bitcoin has shown unexpected success, but its future as a broadly accepted exchange medium is limited, according to a report by a global banking group Thursday.
The report by the International Institute of Finance, which represents more than 450 banks and financial institutions, said more regulation of bitcoin exchanges and transactions could strengthen its legitimacy among consumers and ease regulators’ doubts about it.
But for the moment, the IIF report said, bitcoin faces significant resistance in countries like China.
And because most of the market is dominated by speculators rather than users, bitcoin’s value in other currencies is particularly volatile.
In a market worth about US$12 billion, the IIF said, “It is estimated that 50 to upwards of 90 per cent of bitcoin owners are speculators – thereby contributing to the substantial price fluctuations seen recently.”
It pointed to the sharp fall of bitcoin from a high of US$1,240 to US$576 in just three days last month after China banned its financial institutions from using the currency.