In his paper for the Journal of Payments Strategy & Systems, Raymaekers examined the purpose of cryptocurrencies for making payments. He believes that there are four key questions in the growth and development of cryptocurrencies:

1 - what are the key challenges that cryptocurrencies must overcome to achieve widespread customer adoption?

• trust in service providers
• price stability
• technology performance
• clear regulation
• compelling benefits

2 - when and how cryptocurrencies and their service providers will be regulated?

• Raemakers explores and compares the various options including: no intervention, self regulation, the role of the Central banks, etc.

3 - what are today’s killer apps for Bitcoin, in its current state of technology? 

• micropayments - doesn't really work
• online purchases - Bitcoin promises savings, but costs make go up as volumes grow
• payments at POS - not sure whether Bitcoin has any advantages
• domestic money transfers - many alternatives exist, not sure how Bitcoin is a better alternative
• international money transfers - again many alternatives exist, BUT he points out that, "while cryptocurrency providers operate at a lower cost base today, this is likely to change as more regulation (in particular sanctions screening and anti-money laundering) applies." ALSO he suspects there will be more fees applied by the miners, etc.

4 - what are the more fundamental, longer-term issues that crypto-currencies must solve:

• encryption and lack of privacy
• identity: public keys - "who can be sure who is behind the public key, what 'authority' issued that public key"
• transaction standards: "The Bitcoin block chain is governed by a simple scripting language, limited in scope by design, and that works for simple payment instructions. But to convey rich corporate remittance information, provide additional processing instructions within the instruction, or process payments in a fully automated fashion, more and well-structured fields and code words are required."

In conclusion

Raymaekers cautious conclusion is that, "While Bitcoin may not replace traditional and new payment methods to become a dominant alternative in the short term, banks should look at its underlying technology as a potential generic new way to transfer ownership of value in the longer term.."

• Download Wim's paper, here.

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CTMfile take: This well argued paper raises some of the fundamental issues and problems that cryptocurrencies, such as Bitcoin, face, and, more importantly, shows how seriously the banking industry and SWIFT are taking the emergence of crytpocurrencies and block chain technology. However, the really innovative work on block chain and cryptocurrencies (there is a lot) is going on behind closed doors. This work has yet to be made public and is not included in this paper. 

The real conclusion is that we know a revolution in payments and banking is coming, but we're not sure what it is.