Goldman Sachs CEO Lloyd Blankfein may be inching towards becoming a bitcoin believer.
In a recent interview at the Economic Club of New York, he adopted a cautiously positive tone towards bitcoin, terming it a “consensus currency” similar to fiat currencies. He had criticized bitcoin last November and called it a "vehicle to perpetrate fraud." Blankfein’s remarks come as his investment firm makes plans to enter the world of cryptocurrencies by opening a futures trading desk. (See also: Bitcoin Is Now Bigger Than Goldman Sachs).
Why Bitcoin Should Work
“I can’t say why it (bitcoin) should work,” he said. “But if it did work, I should be able to explain it in hindsight.” Blankfein compared bitcoin’s rise to the evolution of money from gold to hard currency to paper. “You start out with gold as money, and people would only take hard currency, and you make gold coins,” he explained. “Eventually, they would give you a piece of paper with the promise that there was $5 in gold to back the $5 piece of paper, and you can go in and redeem it. Then they gave you a piece of paper and said, ‘there’s $5 of gold, but you can’t redeem it … and we are still doing that today.”
According to him, a fiat currency derives its worth from government diktat and a similar approach could be used to legitimize bitcoin as a “consensus currency.” On a personal note, Blankfein was skeptical of cellphones when they were introduced. “I thought who the hell is going to lug this thing around,” he said.
Note of Caution
Despite his note of optimism about bitcoin’s prospects, Blankfein also sounded a note of caution about the current state of cryptocurrencies. “It would be painful for someone to put his or her net worth into cryptocurrencies today,” he said, in a reference to the scandals and volatility that have punctuated their journey to mainstream spotlight. “But it’s not a systemic issue. People are passionate for it and passionate against it.” Blankfein said he doesn’t own any bitcoin and neither does Goldman Sachs, per his knowledge, adding, "It's (bitcoin) not for me." (See also: If You Had Purchased $100 Worth Of Bitcoin In 2011.)
Investing in cryptocurrencies and Initial Coin Offerings ("ICOs") is highly risky and speculative, and this article is not a recommendation by Investopedia or the writer to invest in cryptocurrencies or ICOs. Since each individual's situation is unique, a qualified professional should always be consulted before making any financial decisions. Investopedia makes no representations or warranties as to the accuracy or timeliness of the information contained herein. As of the date this article was written, the author owns small amounts of bitcoin and litecoin.