Researchers at Citi, a leading US bank believe that Bitcoin (BTC) could soon evolve into an international trade currency, enhancing global trade in the process. The researchers aired these sentiments through a new report entitled Bitcoin: At the Tipping Point. In the publication, Citibank’s research team focused on BTC’s transformation from a form of payment at launch to a store of value at the moment.
According to the report, BTC boasts properties that would make it a preferred currency for international trade. These include its decentralized and borderless design, lack of foreign exchange exposure, fast and cheaper money transfers, secure payment channels, and traceability. Paired with the coin’s widespread adoption, the report’s authors believe BTC could unlock this new achievement in the next seven years.
Per the researchers, importers and exporters might change their ideas of trade. Instead of working with numerous currencies or stablecoins, traders might opt to use a single currency, which would let them execute fund transfers directly.
Explaining how such a transition would benefit BTC, the researchers said,
A decentralized cryptocurrency might be preferred as no government or outside entity can take steps that might affect the supply of the trade currency, helping to decouple trade from political considerations. While the U.S. dollar is often the default trade currency today, growing tensions between the U.S. and China are creating concerns about the future. The most well-established and liquid cryptocurrency is Bitcoin, making it the likely beneficiary of a move to a new crypto trade currency.
BTC’s scalability is still a big challenge
However, the researchers took note of risks and impediments that might prevent BTC from achieving this feat. The most significant issue is the volume of transactions the Bitcoin network can handle. At the moment, the network can only process an average of 5 transactions per second. In comparison, Visa executes 24,000 transactions in a second, making the Bitcoin network 4,800 times slower.
Apart from this, global acceptance is also a big obstacle in BTC’s journey to becoming an international trade currency. Some countries still don’t believe in BTC’s capabilities. As a result of this skepticism, some countries have outright banned the coin.
While institutions have been increasingly joining the crypto bandwagon, concerns over capital efficiency, insurance and custody, security, and ESG considerations from bitcoin mining might see them pull back.
To this end, the researchers concluded that,
Bitcoin is at the tipping point of its existence and the path forward from here may have broad and widening repercussions.
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