According to a latest report published by the British Banking Association (BBA), as digital currencies capture market more and more, they will continue to threaten the traditional banking system.
"Cryptocurrencies increasingly look like becoming ubiquitous challengers to more familiar, established currencies. And, as they grow in popularity, so too will the risks for banks," the report reads.
It emphasised the issues both caused and faced by bitcoin, like volatility, its perception as a haven for illegitimate payments activity and its rather low market cap. The report pointed out that the risks that bitcoin presents to the banking system should not be ignored.
"Bitcoin users can handle many of their daily payments needs themselves, without the need for interaction with banks, and avoiding the need to incur bank fees. In the same way, value stored in PayPal accounts moves outside of the bank's payment systems, depriving banks of valuable payments revenue", it said.
The association said that it is important for banks to act immediately, to invest time and energy to understand how best to use the technology behind bitcoin.
"Banks must accept that they are increasingly part of the broader ecosystems that customers are constructing around themselves. However, their place in these ecosystems is far from secure," the report concluded.
