White shoe investment bank Goldman Sachs has admitted that Bitcoin and other digital currencies could succeed as real money in developing economies. Goldman strategists wrote in a recent report:

“In recent decades the U.S. dollar has served its purpose relatively well. [But] 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.”

Nonetheless, the investment bank warns against expecting 2017-level returns:

“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.”

Changing tides

This is a remarkable change of tune from the skepticism with which big banks and “mainstream” investors have generally treated digital currency. JPMorgan Chase CEO Jamie Dimon famously called Bitcoin a fraud last year, while legendary billionaire investor Warren Buffett insists that Bitcoin isn’t money and people should stay away. Likewise, hedge fund magnate Ray Dalio dismisses Bitcoin as a bubble.

Outsized importance

Goldman Sachs holds outsized influence in the world of finance and politics. Both The Independent and Al Jazeera refer to Goldman as the bank that controls the world. The Atlantic is only slightly more subtle, referring to Goldman Sachs’ growing influence in the US government as “The Quiet Coup.”

Likewise, the Huffington Post has written extensively about the “revolving door” between Goldman Sachs and the US government. The publication points out that two Goldman Sachs CEOs - Rubin and Paulson - have served as US Treasury Secretary, and former CEO Jon Corzine became a US senator. Other Goldman alums serve in various positions throughout government and finance.