How Wall Street’s Blackrock, Goldman Sachs, Morgan Stanley and JPMorgan Chase View Bitcoin
How Does Wall Street View Cryptocurrencies?
Last year was undeniably a banner year for the cryptocurrency community. Bitcoins and many other alt-coins reached all-time-highs in December. However, 2018 has not been quite as fruitful. Prices dropped following those highs and have only recently started to level off midway through the year. With this bearish market appearing to wind down, let’s look at where some of the biggest players on Wall Street stand with the cryptocurrency market moving forward.
In July, Blackrock, announced plans for a working group that would assess the possibility of investing in Bitcoin. While a number of options are on the table for the world’s biggest exchange-traded fund, Bitcoin future’s appear to be in the company’s plans. This represents a drastic change of heart for Blackrock after CEO Larry Fink remarked last fall that Bitcoin was “an index of money laundering.”
Of course, Blackrock appears to be merely following in the footsteps of its competitors, namely Goldman Sachs, which has already had some success with cryptocurrency investment. Blackrock’s latest working group appears to be taking a close look at what other Wall Street firms are doing right in the crypto arena.
Speaking of Goldman Sachs, they have been making progress in the crypto market for much of the year. Interest from their clients grew to the point that they hired crypto trader Justin Schmidt in April. A month later, executive Rana Yared confirmed the banking firm would buy and sell Bitcoin at some point based on client interest and their conclusion that cryptocurrencies, in general, were “not a fraud.”
In fact, former Goldman executives have made their way to crypto firms. In May, Priyanka Lilarmani became the CEO of Malta-based startup HOLD. Breanne Madigan joined Blockchain.com, a crypto wallet, in April. Also in April, Richard Kim became CEO of Galaxy Digital. Prior to his exit from Goldman Sachs, Kim was reportedly working on creating a crypto trading desk for the banking giant.
Of course, those three leaving Goldman Sachs deprives the company of some of its crypto experts. Nevertheless, they are moving forward with plans to get into the crypto arena. The firm is helping customers to clear Bitcoin futures and has plans for a crypto derivatives trading desk. Furthermore, CEO Lloyd Blankfein told Bloomberg in June that Bitcoin is on its way to being adopted by mainstream financial institutions much in the same way paper money once replaced silver and gold coins.
During the rise in crypto interest in 2017, Morgan Stanley called for more cryptocurrency regulation. But it was around this same time we learned that since March 2016, Morgan Stanley had actually been using blockchain platforms to back up their records and process transactions.
Morgan Stanley CEO James Gorman has continued to send mixed messages about the company’s stance on cryptocurrencies. He conceded that it was not just another fad while also warning that the increase in crypto value in 2017 did not make it a “stable investment.” In March, Morgan Stanley told clients that Bitcoin shared similarities with Nasdaq except that it was moving at a much faster pace. The company also hired a crypto expert in August to run its digital assets department, all but confirming their belief that cryptocurrencies are here to stay.
In recent years, JPMorgan Chase has had a rather rocky relationship with cryptocurrency. In 2017, CEO Jamie Dimon compared the crypto craze to the popularity of Dutch tulips in the 17th century. He called it a fraud and threatened to fire any employees who bought and sold Bitcoin for JPMorgan clients. However, just a few months later, the banking group announced it would at least consider giving clients access to Bitcoin futures via the Chicago Mercantile Exchange.
By early 2018, Dimon backed off his earlier comments, although he did express a “lack of interest” in getting involved in cryptocurrencies. In February, JPMorgan reported to the SEC that cryptos were being considered a competitor to the banking industry and a risk to such financial institutions.
However, JPMorgan Chase has slowly started to come around on crypto. In May, JPMorgan filed a patent for a p2p system of both inter and intra-bank settlements that utilized blockchain technology. They also created a position for someone to serve as the head of crypto-assets strategy. That job was soon given to Oliver Harris, who will help the company look into blockchain applications for payment services already offered by JPMorgan Chase.
While they have slowly started to accept the crypto community, JPMorgan also banned its customers from using their credit card facilities to purchase crypto tokens. They charged large fees to customers who used their credit cards to buy cryptocurrencies and faced a lawsuit because of it. Despite some use of blockchain technology, JPMorgan Chase appears to be a long way away from crypto trading or even encouraging its clients to pursue such investments.
Auditing firms have also had their interest piqued by blockchain and cryptocurrencies over the last year or so. Several notable firms like KPMG, PcW, and Deloitte have all found ways to utilize blockchain technology. This shows us that the technology can be used for auditing and not just for making payments.
What’s The Time`line?
While the major players on Wall Street don’t exactly have comparable levels of enthusiasm with regard to cryptocurrencies, all indications are that most of them will adopt crypto trading at one point or another. That begs the question of when this will happen.
Former Goldman Sachs employee Mike Novogratz has intimated the day of full-scale crypto trading on Wall Street is more than five years away. When the big boys enter the crypto arena, they will likely do it slowly.
Meanwhile, Peter Smith of Blockchain.com told Bloomberg that he expects a “consolidation” of markets. He also said that major institutional investors entering the market would influence the recent rise in the price of Bitcoin. However, the full impact of those investors may not be noticed until 2019.
A Word On ETFs
In recent years, many have pondered the possibility of a Bitcoin exchange-traded fund. The Winklevoss twins, of Facebook infamy, have had two proposals of a Bitcoin ETF rejected by the SEC. However, that doesn’t preclude financial institutions from being approved in the future. Many experts believe that if a Bitcoin ETF were approved, it would be a positive for the cryptocurrency industry. However, until that happens, the crypto community waits following a period of both highs and lows over the past 12 months.