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Goldman Says Crypto Coins Could Become Viable Currencies in Developing Countries
Capital Markets, FinTech
Goldman Sachs Group asserted in a report on Wednesday that cryptocurrencies could find success as real money in developing countries, according to Bloomberg.
The premise of the report, written by strategists Zach Pandl and Charles Himmelberg, is that while the dollar in the U.S. has been stable and “served its purpose relatively well,” the same can’t be said for the currency in many developing countries.
“[In] those countries and corners of the financial system where the traditional services of money are inadequately supplied, Bitcoin (and cryptocurrencies more generally) may offer viable alternatives,” Pandl and Himmelberg note, via Bloomberg.
Goldman has been arguably the most high-profile investment bank to embrace the potential of cryptocurrencies, providing a stark contrast to other Wall Street A-Listers like JPMorgan’s Jamie Dimon, who have remained skeptical (or outright opposed) to bitcoin and other digital coins. In fact, Goldman is reportedly trying to get a crypto-trading operation up and running by the end of June, as Bloomberg reported last month.
Meanwhile, Bloomberg provides a little more context on why cryptocurrencies could succeed in the developing world.
Many currencies in sub-Saharan Africa have lost value due to high inflation and supply mismanagement. As a result, foreign money makes up more than 90 percent of deposits and loans in the Democratic Republic of the Congo, and Zimbabwe demonetized its currency in 2015. Bitcoin could also be useful in regions where governments impose strict rules on the use of traditional currencies from other countries.
One drawback for investors if cryptocurrencies become widely used? All those outsized returns from bitcoin will probably be no more, according to Pandl and Himmelberg, falling more in line with gold or other metals.
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