TechCrunch has gotten hold of an internal report by Goldman Sachs wherein the investment firm takes a deep look at crypto-currencies, and many are quick to call it a devastating blow to Bitcoin’s future.
The report says that bitcoin is not a real currency, and shouldn’t be trusted as a safe store of value. But worrying about whether or not bitcoin is real misses the point of what the report really says about Bitcoin’s potential.
For bitcoin enthusiasts, talking about whether or not one crypto-currency is valuable misses the point. Bitcoin is built on systems that could transform global finance, regardless of a single currency’s success.
“It’s encouraging to see Goldman Sachs put resources into understanding our space,” Jaron Lukasiewicz, CEO of Coinsetter, told Betabeat. “However, I feel that their opinion was based on a limited understanding of the technology and a faulty premise: namely that consumers will need to take price risk to benefit from the technology’s benefits over the long run.”
While the report concludes that bitcoin is too unstable to be a safe investment right now, it’s Goldman’s duty to investors to err on the side of caution. They even suggest future regulations could create stability for bitcoin, but volatility is part of a paradox at the heart of crypto-currency exchanges.
“Fiat currencies [not backed by a commodity] are generally protected by extensive regulation,” the report said. “They are usually recognized as legal tender; the government is generally obliged to accept them for tax payments; and the central bank is almost always the sole issuer.”
Goldman is clearly interested in a stable future for bitcoin, but there’s tension surrounding the issue: regulating bitcoin would both stabilize the currency and ruin its appeal as a low-friction way to move money.
Regardless of this conflict, upcoming regulation could inspire more faith in crypto-currency.
New York State announced it will start to consider proposals for regulated bitcoin exchanges, offering special “BitLicenses” for virtual currency firms.
“The recent problems at Mt. Gox and other firms further demonstrate the urgent need for stronger oversight of virtual currency exchanges,” Superintendent Ben Lawsky said in a release, and New York-based exchanges have already expressed their interest in applying.
Bitcoin exchanges are making an effort to attract the Wall Street community by creating familiar, traditional trading tools, though crypto-currency enthusiasts are torn over whether or not gaining the favor of Wall Street institutions matters.
You can read the entire report here.