Cryptocurrencies could become an alternative form of money in developing countries, especially in troubled economies, Goldman Sachs stated.
Citing countries such as Zimbabwe and the Democratic Republic of the Congo, where the traditional services of money are inadequately supplied, a new report published by the global investment banking company says cryptocurrencies such as Bitcoin may offer viable alternatives.
As the value of Zimbabwe dollar plummeted, the sub-Saharan African country demonetized its currency. Most of deposits and loans in DR Congo are in foreign money.
This trend suggests there is demand for an internationally accepted medium of exchange and store of value, according to Goldman Sachs strategists Zach Pandl and Charles Himmelberg.
They warned that if digital coins become a widely used form of currency, investors shouldn’t expect the astronomical returns that they have been getting in recent months due to the increasing value, particularly in an environment roiled by speculation and volatile prices.
“Our working assumption is that long-run cryptocurrency returns should be equal to (or slightly below) growth in global real output—a number in the low single digits. Thus, digital currencies should be thought of as low/zero return or hedge-like assets, akin to gold or certain other metals.”
In the research paper titled Bitcoin as Money, the strategists predict bitcoin’s acceptance by Goldman and other institutions, and the introduction of laws and regulations.
In countries such as the United States, where transaction costs are already low, Bitcoin needs to compete ultimately with the dollar, they argue.
While no country has launched its own cryptocurrency yet, Venezuelan president announced plans to create a new cryptocurrency, which he said would help to ease the country’s economic crisis, and circumvent U.S.-led sanctions.
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