Goldman Sachs says Bitcoin is not a currency

TechCrunch reported earlier this week on a report issued by Goldman Sachs in which the bank concluded Bitcoin is not, in fact, a currency.

From the report:

“Bitcoin likely can’t work as a currency, but … the ledger-based technology that underlies it could hold promise.”

“We would argue that Bitcoin, and other digital currencies, lie somewhere on the boundary between currency, commodity and financial asset. ... Our best definition would be that it is currently a speculative financial asset that can be used as a medium of exchange.”

“On net, more than taking off as a widely-used alternative currency, it is much more plausible that Bitcoin eventually has a significant impact in terms of its innovation on payments technology, by forcing existing players to adapt or coopt it.”

The Goldman Sachs report goes on to speculate on the ability of cryptocurrencies as stores of value, similar to the role gold plays. Bank representative Jeffrey Curie is dubious.

“Gold is not failing as a store of value as wood failed as a sources of energy in steam engines,” he writes. “Steam locomotives could go farther and faster on coal. But Bitcoin does not improve upon gold.”

Elsewhere, Circle founder Jeremy Allaire argues that Bitcoin has a huge role to play in the world’s economy, but that some regulation will be necessary for it to grow into that role.

“Ultimately what’s going to be necessary is common supervision,” Allaire wrote. “There need to be common rules for how digital currency exchanges, wallet services, etc., operate that are consistent around the world.”