March 9, 2021

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Ex-Goldman Sachs CEO: Regulation Will ‘Undermine’ Bitcoin

2 min read

In a new interview with CNBC’s Squawk Box, former Goldman Sachs CEO Lloyd Blankfein said there’s reason to be skeptical about Bitcoin.

“It could work,” Blankfein told host Andrew Ross Sorkin. “But, really, at the end of the day, currency is supposed to accomplish a couple of things. It’s supposed to be a medium of exchange, and a store of value.” 

Blankfein went on to explain why Bitcoin doesn’t exactly meet those criteria. 

“It’s a store of value that can move 10% in a day; that, if you lose a code, or lose a slip of paper, it’s lost forever; or, if somebody takes it from you, how will you know? So, the store of value element is a little bit tough,” Blankfein said.

The market more or less bears that out: earlier this month, Bitcoin lost about a fifth of its value overnight. It’s a famously volatile investment—last March, the pandemic-induced stock market crash sent it from the high $8000s to the mid $4000s. And the price saw huge jumps late last year, setting a new all-time high above $40,000.

As far as its being a medium of exchange, Blankfein suggested that Bitcoin’s veneer of anonymity poses a problem for regulators looking to curb money laundering and illegal activity: “You don’t know whether you’re paying the North Koreans, or Al-Qaeda, or Revolutionary Guard.”

While it’s true that Bitcoin is used to finance criminal activity, the system isn’t anonymous: since every transaction is publicly recorded, cash remains a far better option for criminals looking to keep things quiet.

He went on to say that even if Bitcoin continues edging into the mainstream, inevitable regulations may counteract some of the appeal: “This could be workable, but it will undermine the freedom, liberty, and lack of transparency that people like about it in the first place. So that’s the conundrum that Bitcoin will have to deal itself out. If I were a regulator, I would be kind of hyperventilating at the success of it at the moment, and I’d be arming myself to deal with it.”

Bridgewater’s Ray Dalio pointed to a similar tension in an interview with Yahoo Finance last year, saying that governments might even ban Bitcoin if they can’t effectively regulate it.

David Solomon’s Goldman remains ambivalent about Bitcoin. Last year, slides for a company call told customers that Bitcoin is “not an asset class,” though Goldman’s global head of digital assets has since said investments in blockchain tech are still on the table.

The views and opinions expressed by the author are for informational purposes only and do not constitute financial, investment, or other advice.

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