Goldman Sachs is Still Working on Crypto Products, Despite “Fake News” from Earlier This Week
Yesterday, it was reported that Goldman Sachs was shutting down its crypto platform after a disappointing start to the year for crypto markets. Earlier today, Goldman Sachs called that report “fake news” and insisted that its still working on releasing crypto investment products in the future.
It’s been a wild 24 hours for the crypto industry. Yesterday, rumors appeared online that Goldman Sachs had canceled its crypto division. That crypto division had been reported earlier this year, signaling that one of Wall Street’s biggest names was preparing to enter the crypto space. Prices surged the day the news broke.
Then, earlier this week, reports appeared online that Goldman Sachs was no longer preparing to launch crypto products. Markets plummeted.
Now we enter today, where Goldman Sachs has insisted that it continues to develop its crypto product.
As reported by CNBC, Goldman Sachs Chief Financial Officer Martin Chavez is calling the report “fake news”. Chavez claims the bank is continuing to work on a bitcoin derivative known as a “non-deliverable forward.”
In other words, Goldman Sachs isn’t exiting the crypto space anytime soon. In fact, they’re preparing to enter the space in a big way.
Goldman Sachs decided to push forward with the project after continued demand from clients.
“I never thought I would hear myself use this term but I really have to describe that news as fake news,” Chavez told the crowd at TechCrunch Disrupt in San Francisco earlier today, as reported by CNBC. The CFO added that “clients want it” – they want a bitcoin-related investment product from a trusted institution. Chavez explained:
“The next stage of the exploration is what we call non-deliverable forwards, these are over the counter derivatives, they’re settled in U.S. dollars and the reference price is the bitcoin-U.S. dollar price established by a set of exchanges.”
The “fake news” appeared in Business Insider earlier this week. Over the past year, it’s been rumored that Goldman Sachs is developing some type of crypto-related product or platform, but it wasn’t clear what, exactly, they were creating.
Chavez is now totally denying the report that Goldman Sachs is shutting down its crypto product development. However, Chavez insists that there’s no timeline for the launch of the product.
In other words, when it was reported that Goldman Sachs was “exploring” the idea of launching crypto products, it meant exactly that: Goldman Sachs was exploring the idea of launching a crypto product but they weren’t ready to release that product anytime soon.
“When we talked about exploring digital assets that it was going to be exploration that would be evolving over time,” Chavez said.
“Maybe someone who was thinking about our activities here got very excited that we would be making markets as principal and physical bitcoin, and as they got into it they realized part of the evolution but its not here yet.”
Of course, Goldman Sachs is already dealing with bitcoin in a roundabout way. The bank has been clearing bitcoin-linked futures contracts offered by the Cboe and CME since May 2018. Goldman Sachs is also providing liquidity for those futures contracts for clients.
Nevertheless, Goldman Sachs does not yet own any physical bitcoin.
“Physical bitcoin is something tremendously interesting, and tremendously challenging,” Goldman Sachs CFO Chavez said.
“From the perspective of custody, we don't yet see an institutional-grade custodial solution for bitcoin, we're interested in having that exist and it's a long road.”
One of the biggest barriers to institutional participation in bitcoin, so far, has been the lack of an institutional-grade custody solution. Institutions are interested in buying bitcoin for clients, but they’re wary of holding bitcoin outside of institutional-grade custody solutions.
Ultimately, the fact that Goldman Sachs continues to be involved with bitcoin is a good thing for enhancing the legitimacy of the crypto industry. It seems rumors of Goldman Sachs’s exit from bitcoin have been greatly exaggerated.