Former Merrill Lynch executive Bob Wigley has joined the growing ranks of financiers hailing the cost-cutting potential of bitcoin and the technology underpinning the controversial currency.
The group's former head for Europe, the Middle East and Africa called bitcoin a potential "leading global payments system" and said he had invested in a UK-based bitcoin payments start-up.
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On this topic IN Financial Services"It has cost advantages. It's another way of outsourcing in a very cost efficient manner part of the costs of processing transactions. Payment systems are quite costly things to operate," he said, arguing that bitcoin would challenge incumbent financial services providers "anywhere where you have small transaction values and high transaction costs".
Mr Wigley joins Blythe Masters, the former JPMorgan executive who helped develop credit default swaps, Duncan Niederauer, a former chief executive of the New York Stock Exchange and Peter Randall, the founder of Chi-X Europe, as a host of high-profile executives explore ways to apply the technology to financial services.
Bitcoin was invented in late 2008 as a way of making payments without the need for a centralised third-party to track and approve transfers. Transactions are processed by a network of computers, which are rewarded with transaction fees and a subsidy of newly minted currency that will eventually cease.
The technology underpinning the currency is called blockchain and is a way of managing databases in multiple locations in the absence of a single, centralised authority.
Mr Wigley, who previously oversaw the restructuring of the debt-laden Yellow Pages publisher Yell, said he invested this year an undisclosed amount in Blockchain, a UK-based company that derives its name from the underlying technology, and was now advising the group.
Blockchain claims to be the leading supplier of consumer bitcoin "wallets" — software used for receiving and making payments with the currency. Last year, the company raised $30m in funding from investors including Sir Richard Branson, Lightspeed Ventures and Wicklow Capital, which at the time was the largest single funding round by a bitcoin business.
While bitcoin's early backers hailed the invention as a means of freeing money from the control of governments and banks, the likes of Blythe Masters and her start-up Digital Asset Holdings have focused on using blockchain, the technology, as a way of modernising backroom banking systems.
Duncan Niederauer, the former NYSE chief executive, has backed Symbiont, which is developing a platform for digital securities trading. At a launch event last month, Symbiont chief executive Mark Smith said the platform was developed to work with generic blockchains to make it more appealing to banks wary of interacting directly with the controversial currency.
Nasdaq is also using the technology and announced a partnership with US start-up Chain for a private share-trading platform earlier this year.
Mr Wigley said it was too early to write off the "nascent" bitcoin currency and said he believed both bitcoin and blockchain applications would develop alongside each other.
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"I'm not the only one. Many of the UK's biggest banks are taking the view that bitcoin and blockchain could be a fundamental part of the future of the way transactions are done," he said, referring to exploratory initiatives by the likes of Barclays.
Despite his bullishness about bitcoin and blockchain, Mr Wigley said he did not have any money invested directly in the currency. "I don't think you could say that investing in bitcoins specifically is a sound investment," he said, noting volatility in the currency's value.
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