While it is unlikely to ever truly compete with traditional currencies, bitcoin could, when combined with the traditional finance system, have cost advantages over credit cards and money transfer firms like Western Union, according to a Credit Suisse article.

The article, penned by Jonathan Horlacher, concludes that bitcoin's biggest advantage - decentralisation - is also its biggest drawback because there is no authority guaranteeing its value, preventing its widespread adoption as a means of payment.



"Nevertheless, bitcoins have a future in certain areas and countries," says Horlacher, citing its cost advantage over cards and remittance providers as well as an alternative to state-backed currency in countries, such as Argentina and Zimbabwe, where confidence is low.



Ultimately, he asks: "Who do you trust more, your own central bank or an anonymous online network?"



This leaves open the question of central bank-backed virtual currencies; a prospect which has gained traction in recent months. In February, the Bank of England said that the distributed ledger technology that bitcoin relies on "may have considerable promise. This raises the question of whether central banks should themselves make use of such technology to issue digital currencies."



Last month a senior researcher at the Federal Reserve Bank of St Louis floated the idea of a government-backed 'Fedcoin' that uses a bitcoin-style protocol but the US dollar as the monetary object, combining the best of cryptocurrencies and cash.



And it has since emerged that IBM is taking the issue beyond the hypothetical, holding informal discussions with a number of central banks about the creation of a blockchain-based digital cash and payment system for major currencies.