Bank Of America Recognises Benefits Of Bitcoin

Max 'Beast from the East' Smolaks covers open source, public sector, startups and technology of the future at TechWeekEurope. If you find him looking lost on the streets of London, feed him coffee and sugar.

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Analysts warn that the price of the virtual currency should remain below $1300

Analysts at Bank of America (BoA), one of the largest companies in the US, have acknowledged that Bitcoin offers “many benefits” over traditional currencies and has a “clear potential for growth”.

BoA is the first major Wall Street bank to issue an opinion on the electronic currency, however the bank also suggested that Bitcoin will never be able to achieve the status enjoyed by other international currencies due to the lack of regulation.

Bitcoin is a decentralised digital currency based on an open-source, peer-to-peer Internet protocol, first introduced in 2009 by an anonymous developer known under the alias ‘Satoshi Nakamoto’. It is not linked to any real money, but traded on various electronic exchanges to establish its price.

Expert opinion

imagesIn a report published by analysts from Merrill Lynch, a unit within BoA, highlighted the low transaction costs and anti-counterfeiting measures built into Bitcoin. However, they said that the unstable price, vulnerability to theft and other risks associated with Bitcoin stand in the way of it receiving government recognition.

The analysts also said that a 50 minute wait for a transaction confirmation through the blockchain is likely to prevent many serious businesses from accepting Bitcoin as a form of payment. They linked the recent hike in its price to the increasing interest coming from China, with BTC China now a largest virtual currency exchange in the world.

“To the extent that Bitcoin offers users many benefits and efficiencies as a medium of exchange, this means it possesses some fundamental value that may increase over time as it gains wider use,” said the analysts. They warned that the maximum market value of the virtual currency should stay around $1300 in order to avoid “running ahead of its fundamentals”.

The BoA’s seal of approval comes just a day after the  Chinese government banned financial institutions in the country from trading in Bitcoin due to its untraceable nature, which makes the virtual currency perfect for illegal activities such as money laundering, tax evasion and blackmail. This led to a 20 percent plunge in the value of Bitcoin, which is trading as high as $1,155 on Mt. Gox exchange at the time of publication.

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