Follow the Money: Goldman Sachs Eyes Crypto Custody Services
Goldman Sachs Group Inc. is weighing the possibility of launching its own custody offering for cryptocurrencies, a move that would provide a credible backing for digital assets.
According to Bloomberg, the Wall Street investment bank is considering holding securities on behalf of cryptocurrency funds as a means to safeguard against volatility and cyber attacks. Citing private discussions with people familiar with the matter, Bloomberg said the bank has no timeline for when such services, if any, will be offered.
Although the bank has not confirmed its interest in crypto custody services, a spokesperson told Bloomberg it is exploring new ways of servicing the market.
“In response to client interest in various digital products we are exploring how best to serve them in this space. At this point we have not reached a conclusion on the scope of our digital asset offering,” the spokesperson said.
Although Goldman has given mixed signals about how it views cryptocurrencies, it was among the first U.S. banks to clear bitcoin futures contracts offered by CBOE and CME Group. The futures market got off to a tepid start in December but appears to have picked up in recent months. In the second quarter alone, CME’s bitcoin futures contract saw a 93% spike in daily volumes.
Wall Street Embraces Cryptocurrency
Wall Street’s embrace of digital currencies has intensified in recent months as institutions look to capitalize on the next wave of mass adoption. Firms like Coinbase are doubling down on the belief that institutions, and not retail traders, will be the key that unlocks the next great bull market.
In addition to Coinbase, BitGo and Goldman-backed Circle have also been in talks with regulators about bringing custody to the cryptocurrency arena. On the custodian side, Wall Street’s Bank of New York Mellon Corp, JPMorgan Chase & Co and Northern Trust Corp have also been in talks with regulators about expanding crypto offerings to institutional traders.
With New York Stock Exchange (NYSE) operator Intercontinental Exchange (ICE) entering the race for custody, the cryptocurrency market could be on the cusp of a major paradigm shift. As Bloomberg reported in its Goldman Sachs article, custody operations could open the door to other ventures, including prime-brokerage services. Currently, it is estimated that one-third of total cryptocurrency trades are carried out on digital currency exchanges with the remainder facilitated through over-the-counter markets.
Disclaimer: The author owns bitcoin, Ethereum and other cryptocurrencies. He holds investment positions in the coins, but does not engage in short-term or day-trading.
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