Goldman Sachs not backing away from Bitcoin, but rather preparing the ground for physical storage and settlement later down the line. Will offer dollar-settled derivatives first.
Yesterday, we reported on rumours surrounding Goldman Sachs as being one of the drivers of Bitcoin’s price fall. While there were, in our opinion, other factors at play in the rapid decline of BTC – a price move that appeared to cascade across the crypto market, causing several coins to hit low points in price that they’d previously avoided through 2018, wider media seems to have picked up the line and run with it.
That wider perception that Goldman Sachs was throttling back its plans to trade cryptocurrencies in favour of working on custody infrastructure, makes comments yesterday by its chief financial officer, Martin Chavez, all the more interesting. As reported by CNBC’s Kate Rooney, Chavez apparently called the story “fake news”, though he did admit that there was currently no timeline for enacting its plans.
Talking at the TechCrunch Disrupt conference in San Francisco, Chavez said Goldman is working on “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.”
Such an offering would differentiate Goldman from the investment opportunity presented by the NYSE-backed Bakkt, which plans to settle its Bitcoin Futures contracts in physically delivered Bitcoin. That means when the contracts expire, any profit or loss will be paid out and settled in cryptocurrency. No details of its custodial plans, which must be in place for an apparent November launch, are yet forthcoming.
“When we talked about exploring digital assets [we said] that it was going to be exploration that would be evolving over time,” Chavez said of Goldmnan Sachs’ plans.
It makes sense, then if Goldman Sachs is closest to delivering a crypto-related project that doesn’t involve holding and storing cryptocurrency in the way that Bakkt’s will, that its next focus would be on the custodial element that it would need to get in line before it could directly compete.
As HyperVault CEO, Sean Walsh explained to us at the recent World Blockchain Forum, “Institutional investors above a certain size are, in most jurisdictions around the world, required by law to have a custodian hold their assets for them. Without insurance, though, they just can’t. They aren’t going to put their money in. The regulatory environment doesn’t really support going with an uninsured custodial service.”
For his part, Chavez said “Physical bitcoin is something tremendously interesting, and tremendously challenging.”
“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.”
Walsh told us that HyperVault was already signing up customers to its fully insured custodial solution for cryptocurrency, and would be ready to go live in “about four weeks”.