The bitcoin blockchain poses a negligible competitive threat to legacy institutions, but the technology could open up new markets for financial services, says a new report by Citigroup equities analysts.

The technology could help card networks like Visa or MasterCard and money transfer services like Western Union operate more efficiently, the June 30 report says. More importantly "the power behind an open network like Bitcoin is the possibility of incorporating it with other technologies to bring about true innovation."

For example, the bitcoin blockchain allows mobile phone providers, especially in regions with high populations of financially excluded people, to help "provide the unbanked with low-cost digital banking products," the Citi analysts wrote, highlighting the work of bitcoin startups Circle, which provides a peer-to-peer payments app; Abra, a remittance service focused on financial inclusion; and BitPesa, a payment and trading platform for Africa.

"Cryptocurrencies' potential impact will likely be more from its ability to open up new markets and reach new customers," the report said.

Further, although the report doesn't deem cryptocurrencies disruptive, it said a central bank issued digital currency could, in theory, threaten private-sector banks' role in the payments system, "but this seems to be a very long tail risk."

The Citi report also dismissed the internal "digital currency" being developed at Mitsubishi UFJ Group as one that's effectively a currency backed token amounting to nothing but prepaid money.

This was Citi's third blockchain research report. The previous two focused on use cases in securities settlement and global transaction banking.

