shutterstock_167065787 In a new report, investment firm Goldman Sachs suggests that Bitcoin “likely can’t work as a currency, but some [people] sense that the ledger-based technology that underlies it could hold promise.” (Hat tip to TechCrunch for posting the report in its entirety.) While Bitcoin’s supporters argue that the crypto-currency’s decentralized nature—unlike a government-backed currency, it doesn’t depend on a central bank—is one of its greatest strengths, one of the experts looped into the discussion by Goldman Sachs thinks there’s room for a couple of Bitcoin hoarders to exert undue influence over it. “The people who maintain the Bitcoin network can change the money supply through a majoritarian process,” Eric Posner, a University of Chicago professor who writes about financial regulation, is quoted as saying in Goldman Sachs’ report. “And that means that the supply of bitcoin is a function of what the majority of these people think at any given time.” He finds that concept unsettling, especially since the majority of those dealing in bitcoin “are not economists or monetary experts.” The other experts corralled for the report likewise seem skeptical—to varying degrees—about Bitcoin’s prospects. Goldman Sachs believes that, should Bitcoin continue to grow in popularity as a means of payment, governments will step in with increasing regulation, which in turn could add costs and complications to using it as a medium of exchange. The firm itself doesn’t take a position on the crypto-currency (at least in the report), but will likely need to make moves soon if clients invest in it. Goldman Sachs’ paper runs contrary to an upbeat research report issued in December 2013 by Bank of America, which suggested that Bitcoin could become “a major means of payment for e-commerce” on its way to emerging as “a serious competitor to traditional money transfer providers.” The Bank of America saw Bitcoins’ advantages as low transaction costs, its finite supply (which will protect its value), and its increasing attractiveness as an alternative to “traditional” cash, even as it cited longstanding concerns about the crypto-currency’s volatility and lack of legal backing. The U.S. government has a longstanding interest in Bitcoin. In early 2013, the Treasury Department’s Financial Crimes Enforcement Network (FinCEN) offered up “guidance” for digital currency, insisting that an “administrator or exchanger” for virtual currencies would be regarded in the eyes of FinCEN as an MSB, or Money Service Business—and thus subject to a degree of regulatory scrutiny. The nonprofit Bitcoin Foundation, which promotes the crypto-currency, pushed back against FinCEN, issuing a statement in March 2013 that accused the Treasury Department of overstepping its bounds: “If FinCEN would like to expand its statutory authority over ‘money transmitters’ to include brand new categories such as ‘administrators’ and ‘exchangers’ of digital currency it must do so through proper rulemaking proceedings and not by fiat.” Since that time, Bitcoin only grew in popularity. Virgin Galactic announced it would accept the crypto-currency for future flights into orbit; companies began installing Bitcoin ATMs in Boston, Austin, and Albuquerque. And with that popularity came the criminals, who exploited vulnerabilities in Bitcoin’s code to steal millions of dollars in crypto-currency from public exchanges. Whatever Goldman Sachs ultimately thinks, it’s clear that Bitcoin is still enjoying its time in the spotlight.   Image: Dorottya Mathe/