Bitcoin is at least 50 to 100 years away from being a challenger to traditional currency, according to EY.
Fraud investigation dispute services expert at EY (formerly Earnst & Young) Roger Willis, said Bitcoin's lack of progress to overcome traditional banking systems is due to a misunderstanding about its original goal and nature, during a press briefing attended by V3.
"Bitcoin was originally an experiment, it's just morphed into something massive [that] no one envisaged and there are hurdles that need to be jumped over to make it work. Bitcoin is not designed to replace fiat and if it does it will be 50 to 100 years in the future. Bitcoin was developed to be used in e-commerce and microtransactions – it wasn't made to replace dollars or euros," he said.
Fiat currency is money declared by a government to be legal tender, while Bitcoins are a cryptographic currency that first appeared five years ago. The currency lets users make peer-to-peer transactions without going through traditional banking exchange systems. It uses a self-perpetuating algorithm to automatically determine the value of each Bitcoin.
EY director Colin Pickard, added that despite not being a viable fiat replacement, Bitcoin does still have the potential to revolutionise the way companies do business. "There are definite possible gains, in terms of reduced transaction costs, but there are issues with anonymous users and a lack of regulation. We're not pro or anti-Bitcoin, but we do see there are significant risks," he said.
"Not being controlled by a single state has a number of impacts, one of these is the deflation of the currency. Inflation lets governments borrow from tomorrow's children. A decentralised currency [such as Bitcoin] means this is not an option, so there is a potential positive. The negative is its not subject to regulation or democratic control."
The unregulated nature and potential theorised anonymity of Bitcoins has made the currency popular with criminal groups. The currency is known to be accepted on numerous cyber black markets, including the recently shut down Silk Road.
Willis questioned criminal interest in Bitcoin's alleged anonymity powers, and confirmed that there are ways to track transactions made on the platform. "The notion Bitcoin is anonymous, a lot of people say it is anonymous and untraceable, this isn't necessarily true," he said.
"By nature, to create a decentralised currency you need a record of where each coin is, that's the blockchain and in it you can see every Bitcoin transaction in real time. If a law enforcement agency wanted to trace transactions they could use the blockchain to do this."
Pickard added that criminals are interested in Bitcoins because of the currency's ever-increasing value. "Bitcoins are currently being traded more like a commodity than a currency. This is a problem as it leads to crime and stealing. The crime here is not the same as people stealing pounds. People don't steal pounds to wait and see them go up in value," he said.
Pickard said in order to become properly fit for business, Bitcoin will have to make some concessions to the way the platform runs and find a way to work within the world's existing banking regulatory framework.
"These unregulated virtual currencies are difficult for our traditional banking exchanges to engage with. I would not want to be the first tier-one bank to be doing this. They have to work and think how they can engage with this new currency. This will be a big thing in the US. This is sad as there is a potential gain for the global economy, but we have to figure out how to make it work with our existing banking regulatory framework."
He added that to fully function Bitcoin should be regulated by elected officials, not an independent body.
The EY experts' comments follow widespread reports that hackers are altering their operations to illegally horde Bitcoins. Security firm Symantec reported that the infamous ZeroAccess botnet had been altered to mine Bitcoins using enslaved machines earlier this year.
Privilege escalation bug already being exploited in the wild
NASA's Voyager 2 probe set to reveal secrets of space beyond the heliosphere as it goes interstellar
The probe is now more than 18 billion kilometres from Earth, with equipment enabling it to reveal some of the secrets of interstellar space
Four glaciers located west of massive Totten glacier have lost almost three metres of ice in height since 2008
Ceres, located in the asteroid belt, has a carbonaceous-rich upper crust, SwRI study claims