The implications of bitcoin’s effect on consumer finance, investment and banking are not fully understood, a new report from Innopay suggests.

The payments and transaction service consulting firm explored the nature of digital currency and its impact on a broad range of market sectors, tapping everyone from European central bankers to core members of the bitcoin community for insight. At its heart, the Innopay report points to a broad awakening within the global economy to the benefits of bitcoin and its underlying technology, but acknowledges that ignition remains held back by and large.

Apprehension about the security and stability of bitcoin, especially among banks, large companies and a broader subset of consumers keeps the clear benefits of digital currencies from achieving mainstream usage. The experts interviewed by Innopay agree that bitcoin will deeply affect how people transact with one another, but remained split on how digital currency technology will manifest in the years ahead.

Economist and CoinDesk contributor Tuur Demeester told Innopay:

“Just like the Internet has broken open the information market, one can expect the same paradigm shift to occur with cryptocurrencies on the financial market.”

Digital currencies were also seen through the lens of regional financial crises, consumer technology and the future of the internet. The rules of global finance, the Innopay report explores, could be fundamentally rewritten by the likes of bitcoin and other currencies.

Payments networks revisioned with bitcoin

One area explored in the report is the concept that bitcoin can change how businesses and consumers pay one another. At the center of this, Innopay notes, is the change in how financial parties trust one another. The evolving nature of this trust structure carries the potential for significant benefits – and complications.

As Demeester remarked, the number of bitcoin transactions continues to grow steadily but this fact does not preclude traditional payments networks from maintaining a significant role by comparison. However, he said that many of the core services offered by banks may be facilitated more cheaply and efficiently with digital currencies, suggesting that banks are at risk of market loss for their inaction.

He said:

“The traditional financial system is being challenged to step up their game in terms of efficiency because the bitcoin environment is removing middlemen.”

Others who spoke with Innopay were less convinced.

Kim Gunnink, an official with the Dutch Central Bank’s Payments Systems Policy Department, said that the central bank views bitcoin usage today as “a fad”. Gunnink argues that bitcoin’s performance as a type of money is poor overall, citing its fluctuating value as a critical flaw that makes it ineffective as both a unit of account and a store of value. As well, the official said that the future of bitcoin transaction fees could pose a long-term issue.

On the other hand, Gunnink noted the growing influence of digital economies among businesses and consumers, leaving the door open for the technology to grow in usage. Gunnink added that the addition of new services and avenues for digital currency acquisition would ease adoption, saying:

“Cryptocurrencies could be gaining ground in the field of cross-currency payments, as a growing payment method for global online purchases or peer-to-person payments. To what extent this growth will become a reality is still unclear.”

Why bitcoin is held back

Innopay’s report also confirmed what many other observers have said about the barriers to bitcoin’s success. A mixture of uncertain regulation, poor consumer information and complicated means to acquire bitcoin makes it difficult for broader use to take off.

Dave Birch, a director for IT advisory firm Consult Hyperion, remarked that governments remain cautious about passing definitive legislation about bitcoin because they both lack understanding of its underlying technology and fear missing out on future tax revenue. However, he predicted that governments will eventually see bitcoin’s potential to create “a dynamic and efficient economy”.

A lack of bank participation makes the situation even more untenable, but according to the report, bitcoin technology may one day find a strong ally in the global banking sector. Owing to the need to update legacy money networks worldwide – and the possible erosion of their core services – banks may have little choice but to embrace bitcoin.

However, it’s likely that this shift will manifest in the utilization of the protocol itself rather than bitcoin or another digital currency. But this isn’t necessarily a problem for bitcoin, as Innopay itself notes in the report’s conclusion: