Bitcoin and cryptocurrencies are unlikely to survive long-term as governments scramble to regulate them, according to the chief executive of French banking giant Societe Generale.
Frederic Oudea said that, while he was a believer in distributed ledger technology — which allows data to be stored in enormous volumes across a secure network of computers — virtual currencies carry too much risk due to their anonymity.
“The benefit so far is it provides anonymity to the people who are making the transactions,” Oudea told CNBC on the sidelines of the Web Summit conference in Lisbon, Portugal, on Tuesday.
“I can’t see a future of this when I see the attention played by all governments and regulators on anti-money laundering, on anti-tax evasion, on anti-terrorism financing. The anonymity of the transaction is a problem I think which would put pressure on bitcoin.”
Societe Generale has itself experimented with a blockchain-based trade finance platform. But Oudea said: “I prefer to use the word distributed ledger technology and not blockchain.”
Blockchain technology was originally created to serve as a digital log of all bitcoin transactions. But now companies are looking at other use cases of the technology.
Oudea said he was “not convinced” digital currencies would “see any development.”
“I’m more a believer of a distributed ledger technology where you have a defined set of players (that are) well-identified,” he said. “We choose this mix of crypto technology to secure transactions.”
The executive suggested he was open to the idea of a virtual currency that could be backed up by fiat currency, but said that cryptocurrencies were too risky to be considered for mainstream use.
“I think we need to be a bit more precise on what we call virtual currency at the end of the day. If it’s just a way in a transaction, at some point to add something which virtually can translate on both sides into real currencies, maybe it can be used as a system. The blockchain system and the bitcoin system is very different.”
Oudea joins a long list of bank executives to criticize bitcoin and cryptocurrencies.
“I think most banks in the current state of regulation have little or no appetite to get involved in a currency which has such anti-money laundering challenges,” Tidjane Thiam said.
Sergio Ermotti, chief executive of UBS, said he was “not necessarily” a believer in cryptocurrencies. But, like many other banking chiefs, Ermotti said that he believed there was “a future for blockchain technology.”
The cryptocurrency has also drawn regulatory concerns. Authorities in China made a decision to close down local bitcoin exchanges in September, a move that saw a temporary dip in the price.