Big U.S. banks, including Bank of America Corp. (BAC), Goldman Sachs Group Inc. (GS), JPMorgan Chase & Co. (JPM) and Morgan Stanley (MS) are likely to be "very afraid" of bitcoin, per a CNBC report. This may come as a surprise, especially given the harsh criticism leveled against bitcoin by JPMorgan Chase CEO Jamie Dimon. It also is unwelcome, given other issues that have been weighing down on bank stocks recently, such as low loan growth, profits being squeezed by low interest rates, and fading hopes of deregulation. (For more see also: Jamie Dimon Call Bitcoin a 'Fraud'.)

Bitcoin's Threat

The idea that bitcoin might be threat to established banking institutions was shared with CNBC by Rainer Michael Preiss, executive director, client investments, at Taurus Wealth Advisors, a Singapore-based family office. Preiss believes that cryptocurrencies such as bitcoin have a certain attractiveness given the lack of transparency in the banking system. For example, he says, the Federal Reserve has refused to allow an independent audit of its massive $4.5 billion balance sheet.

By contrast, Preiss continues, bitcoin's blockchain technology logs every transaction and gives users a full view of its digital ledger. Moreover, he adds, cryptocurrencies could offer a "systemic hedge" against asset price inflation, itself partially the creation of central banks such as the Fed. Finally, he sees the big increase in the value of bitcoin, from about $700 in January 2014 to nearly $4,000 on Wednesday, as evidence that it is "a good store of value" for some investors, according to CNBC.

Potentially Disruptive to Banks

Possibly a more general fear among banks regarding bitcoin is "that it disrupts the need for a bank to intermediate transactions," writes Nick Bilton in Vanity Fair. Among its advantages versus banks, he says, is that "you don't need a driver's license" to open an account, and you don't pay account fees. Moreover, he adds, the blockchain technology behind bitcoin cannot be hacked, unlike bank accounts, making it a more secure store of value. Indeed, JPMorgan Chase is among the companies working on adopting blockchain technology for banking applications, per a report in Fortune.

All the above explains why many Japanese banks are trading bitcoin. Also, both Morgan Stanley and JPMorgan are now buying notes linked to the price of bitcoin, even after the latter's CEO called it a fraud. Ironically, JPMorgan's efforts to create the blockchain-based Enterprise Ethereum Alliance are characterized by Bilton as a competing cryptocurrency initiative. (For more, see also: JP Morgan Buys Bitcoin ETN for Clients After CEO Calls It a 'Fraud'.)

Bitcoin's Limitations

Bitcoin and other cryptocurrencies have a host of imperfections, Bilton notes. Among these are theft, huge fluctuations in value, no way to recover lost passwords, and being much more difficult and complicated to use than traditional cash. Nonetheless, he muses, "one wonders if full-scale disruption of the banking system is not far in the offing." That thought also may be disrupting the sleep of big bank CEOs.