As cryptocurrencies grow in popularity, they will continue to threaten revenue streams of the traditional banking system, according to a new report from the British Banking Association (BBA).
A section of The Digital Disruption: UK Banking Report looks specifically at cryptocurrencies and the impact they have already had, and will continue to have, on people's perceptions of monetary transfer.
"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 goes on to emphasise issues presented and faced by bitcoin, including its volatility, its perception as a haven for illegal payments activity and its relatively low market cap ($3.4bn at press time).
However, the report concedes that the risks presented to the banking system by bitcoin 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."
The BBA believes it is important for banks to take action now, investing time and energy in understanding 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 concludes.