Goldman Sachs has been making strides in the cryptocurrency industry, with a recent surge in prices driven by both retail and institutional investors. According to reports, the global investment bank’s head of digital assets, Mathew McDermott, noted a significant transformation in client types and volumes since launching their crypto trading desk in 2021.
The launch of U.S. spot bitcoin exchange-traded funds (ETFs) is believed to be a major factor in the recent gains of bitcoin, causing a “psychological shift” in the market. However, McDermott also acknowledged the risks associated with digital assets, as regulators consistently warn about their high risk nature.
Despite the potential for significant gains, McDermott pointed out that cryptocurrencies have limited real-world use. However, he sees promise in the underlying technology, blockchain. He predicts that over time, more asset classes will be tokenized and traded using blockchain technology, but this may take one or two years to materialize.
In another development, Goldman Sachs was among several firms that participated in a series of tests on a blockchain network connecting financial institutions. The pilot involved over 350 simulated transactions for tokenized assets, fund registry, digital cash, repo, securities lending, and margin management.
On March 13, Travis Hill, vice chairman of the Federal Deposit Insurance Corp. (FDIC), highlighted the potential of blockchain technology, but expressed caution towards cryptocurrencies. He also emphasized the need for regulatory clarity on the uses of technology and what is considered safe and sound.
Hill believes that through the use of blockchain, various assets such as commercial bank deposits, government and corporate bonds, money market fund shares, gold, and other commodities can be transferred more efficiently. However, regulatory clarity is essential to ensure its safe and sound use.
