Bitcoin does not as yet pose a threat to existing centralised payment networks, argues Citibank in a new research report, dismissing the digital currency as an interesting experiment with limited use cases for peer-to-peer transfers.

The bank's research team cites problems like scalability, network adoption and lack of a legal/regulatory framework for dispute resolution as drawbacks to more widespread adoption of the virtual currency.



The report points to social payments network Circle, financial inclusion outfit BitPesa, and B2B remittance firm Abra as companies developing interesting niche business cases for bitcoin, but argues that no-one has yet to build a killer app that could propel the crypto-currency into the mainstream.



The authors dispute the idea that bitcoin can provide a cheaper, frictionless payments experience compared to established infrastructures.



"Since the network incurs substantial energy-related costs due to proof-of-work, we believe that these costs will eventually be borne by the users through high transaction fees, which will make it more expensive than centralized networks," the report states.



And while a central bank-backed digital currency could pose a disruptive threat to current bank operations, Citi views this as an improbable "long-tail" risk.



A more likely long-term future for bitcoin may lie in integration with machine-to-machine payments supporting applications in the Internet of Things.



States the report: "We believe an open network like bitcoin combined with mobile, machine learning, big data and the Internet of Things has the potential to create radically new models."