Citi Research released a 56-page report on bitcoin saying that it is not going to disrupt banks or credit card networks. It says there will be increased transaction costs for bitcoin to provide increased volume. As for the use of bitcoin in remittance payments, it says bitcoin’s advantage dissipates when the “last mile” cost of converting to fiat currency is considered.

The report notes the growth of bitcoin mobile apps in developing countries but sees regulations rising that put them in question. It claims existing payment systems are generally efficient. The report also talks about Ripple and Ethereum as well as government-backed digital currencies. There is also an extensive summary of bitcoin’s legal status in different countries.

Despite these findings, Citi believes digital currency holds promise for financial services. It also believes government-backed digital currencies can disrupt existing payment systems, although these projects remain in a developmental stage and face a host of uncertainties.

Circle is cited as well positioned as global payment app. BitPesa is seen benefiting from an inefficient market for small businesses in Africa. Abra, while creative as a financial inclusion model, is threatened by regulatory compliance issues.

Decentralized Payment’s Real Benefits
The report claims a decentralized payment system will have limited benefits as an alternate domestic network in developing nations on account of the limited advantages of speed and cost against the the existing infrastructures.

The same issues are concerning for cross-border remittance payments.

Citi Research has done three previous reports on blockchain technology and concludes there are limited use cases for the peer-to-peer (P2P) value transfer on account of network adoption, scalability and a lack of a regulatory framework for dispute resolution.

It claims the best use for blockchain technology is where numerous parties to transactions must share information.

Where Blockchain Really Helps

The ability to evade third party intermediaries can bring cost savings for institutions that spend extensive resources reconciling data, the report notes. The best use cases are where the data is static as in supply chain management, mortgage title, and identity, since there are scalability limitations for blockchain solutions.

The two key components governing Citi’s views of payments are messaging and settlement, both of which are highly regulated.