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Goldman Sachs criticizes the anonymity of Bitcoin

Photo of: Nathan VDH
by Nathan VDH

For Lloyd Blankfein, CEO of Goldman Sachs, Bitcoin must trigger hyperventilation crises within governments today. The pseudonymization of the BTC is to blame. But Blankfein also contests Bitcoin’s qualification as a reserve of value.

The governor of the Bank of England criticizes the current cryptocurrencies for their inability to ensure stability in terms of value. Andrew Bailey’s criticism has at least one proponent within Goldman Sachs.

On CNBC, a Goldman Sachs chairman challenged him on the characterization of Bitcoin as a store of value. It’s a long way from the mark, says Lloyd Blankfein. The very high volatility of the BTC price clearly disqualifies it.

However, this is not the only flaw in cryptocurrencies. “It is a reserve of value that can vary by 10% in one day. If you lose the code or if you lose the piece of paper, it’s lost forever,” says the bank executive.

Blankfein refers here to the considerable loss of Bitcoin due to lost passwords or private keys. Glassnode estimated the number of Bitcoin available at 18.6 million. Of these, about 3 million would be lost.

How can institutional investors be discouraged from investing in Bitcoins? For SkyBridge Capital, however, this point should be put into perspective. The company believes that regulatory changes now make it possible to develop an offer for institutions, mitigating these risks.

Nevertheless, regulation remains a concern when it comes to Bitcoin. At least this is the opinion of the president of Goldman Sachs. For the latter, legislators should observe with concern the current success of crypto-active.

“If I were a regulator, I’d be sort of hyperventilating because of [Bitcoin’s] success right now, and I’d arm myself to deal with it,” he says. The reason for this concern? The confidentiality or pseudonymization surrounding transactions.

The operation of cryptocurrencies paves the way for the development of illicit financing. “You don’t know whether or not you’re paying the North Koreans, or Al-Qaeda, or the Revolutionary Guard,” says Blankfein.

The nature of the crypto-assets would be an obstacle to the ability of governments to supervise the financial system. The head of the American bank therefore suggests that the states should intervene to introduce more regulation and transparency in these transactions.

Blankfein recognizes, however, that such a move could seriously reduce the BTC’s assets and thus the demand for the asset. “This could be achievable, while undermining the freedom and lack of transparency that makes it successful. This is the conundrum that Bitcoin will have to face,” he concludes.