Goldman Sachs Is Getting Serious About Cryptocurrency
Goldman Sachs made a significant push into the cryptocurrency market earlier this month by hiring Justin Schmidt to lead its digital asset division. While the bank remains non-committal about the scope of its cryptocurrency operation, actions speak louder than words.
Financial news site Tearsheet first reported the news of Schmidt’s hiring in an article on Monday, indicating that the former cryptocurrency trader had reported to work on Apr. 16. The article quoted Goldman Sachs spokewoman Tiffany Galvin, who issued the following statement:
“In response to client interest in various digital products, we are exploring how best to serve them in the space. At this point, we have not reached a conclusion on the scope of our digital asset offering.”
The Wall Street bank has quietly led the institutional push toward cryptocurrency, having already cleared bitcoin futures on behalf of clients. Goldman CEO Lloyd Blankfein announced last autumn that the bank was exploring the possibility of cryptocurrency trading services.
In December, Bloomberg reported that the bank had already decided to set up a trading desk to make markets in digital assets, with a tentative launch expected by June of this year. Blankfein later tempered those expectations by indicating that his bank would be merely clearing futures on bitcoin for the time being. (That said, Goldman Sachs has owned a stake in a bitcoin trading desk since 2015 as part of a $50 million funding round in Circle Internet Financial.)
The addition of Schmidt, who is an MIT computer science graduate, is a strong sign that Goldman is moving forward with its plans to service the digital currency market. This could entail helping clients gain exposure to the asset class using both conventional and non-conventional methods. A trading desk model would mean that cryptocurrency transactions are actually facilitated through the investment bank, which would give Goldman the distinction of market maker.
Institutional Interest: The Key to the Future?
Some of bitcoin’s biggest advocates believe that institutional trading is necessary to increase mainstream adoption of cryptocurrency and promote stable markets.
Efforts are also underway to convince the U.S. Securities and Exchange Commission (SEC) to allow for the first bitcoin exchange-traded fund (ETF). Such a move would bring crypto into the fold of a $5 trillion (and growing) ETF market. However, this would require the SEC to adjust an important section of the 1934 Securities and Exchange Act. The regulator has launched formal proceedings on the matter after CBOE presented a new case for bitcoin futures.
The institutional tide will likely grow now that the cryptocurrency market has returned to grow. The asset class has added more than $150 billion in value since hitting new bear-market lows earlier this month.
Billionaire George Soros is among the big names planning to enter the market, according to various reports. Soros is famous for shorting the British pound in 1992, where he netted $1 billion in profits for betting that the Bank of England (BOE) would abandon the European Exchange Rate Mechanism.
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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