Goldman Sachs is seriously considering its own cryptocurrency, possibly a stablecoin, as it significantly expands its digital assets team and appoints a new head to spearhead efforts.
- Matthew McDermott, Goldman's new digital asset global head, confirmed the U.S. investment bank was exploring whether to launch its own digital asset, CNBC reported Thursday.
- "We are exploring the commercial viability of creating our own fiat digital token, but it's early days as we continue to work through the potential use cases," he said.
- Last month McDermott hired Oli Harris as head of strategy. Harris was instrumental in JPMorgan's blockchain, Quroum, as well as its settlement coin, JPMCoin.
- McDermott said he is already looking at how blockchain can make savings in the inefficient repurchase, or "repo", market used by banks to lend money to one another, as well as credit and mortgage markets.
- He also said Goldman might consider collaborating with its rival, JPM, as well as Facebook on future digital asset initiatives.
- McDermott said he plans to significantly expand Goldman's digital asset team, including doubling headcount in both Asia and Europe.
Previously on Goldman Sachs
Goldman Sachs held an investor call Wednesday to discuss current policies for bitcoin, gold and inflation in the context of the COVID-19 crisis. The big takeaway? The stalwart investment bank is still no fan of bitcoin or other cryptocurrencies.
A slideshow released before the call cited hacks and other losses related to cryptocurrencies as well as their use to "abet illicit activities" as some potential liabilities.
Seven of Goldman's 35 slides mention bitcoin, but the people on the call only discussed bitcoin for roughly five minutes at the end, with no questions taken after.
In the call materials, Goldman notes that while cryptocurrencies like bitcoin "have received enormous attention," they "are not an asset class."
Why? The reasons include bitcoin's inherent lack of cash flow, unlike bonds, and its inability to generate earnings through exposure to global economic growth, according to the presentation. Goldman also notes bitcoin's volatility, citing the recent drop to 12-month lows in early March. The price spiked nearly 5% to $9,200 a few hours before the call.
A slideshow released before the call cited hacks and other losses related to cryptocurrencies as well as their use to "abet illicit activities" as some potential liabilities.
Seven of Goldman's 35 slides mention bitcoin, but the people on the call only discussed bitcoin for roughly five minutes at the end, with no questions taken after.
In the call materials, Goldman notes that while cryptocurrencies like bitcoin "have received enormous attention," they "are not an asset class."
Why? The reasons include bitcoin's inherent lack of cash flow, unlike bonds, and its inability to generate earnings through exposure to global economic growth, according to the presentation. Goldman also notes bitcoin's volatility, citing the recent drop to 12-month lows in early March. The price spiked nearly 5% to $9,200 a few hours before the call.
Some professional cryptocurrency analysts were less than impressed by Goldman's analysis. "The criticisms were very cookie cutter, the type you'd expect if someone just read mainstream headlines," said Ryan Watkins, bitcoin analyst at Messari and former investment banking analyst at Moelis & Company. "It's like they didn't fully diligence the asset."
Goldman's cash flow argument was particularly odd to Tom Masojada, co-founder of OVEX Digital Asset Exchange.
"Many investments that Goldman labels as 'suitable for clients' do not generate cash flows and are primarily dependent on whether someone is willing to pay a higher price at a later date," he said on Twitter.
"One could argue bitcoin isn't backed by anything, but to liken it to a game of hot potato ignores the subjective value such a novel asset provides," said Kevin Kelly, former equity analyst at Bloomberg and co-founder of Delphi Digital, a cryptocurrency research firm that recently published a comprehensive report on bitcoin.
Bitcoin's current value, according to Kelly, is backed by "the demand for an apolitical speculative asset that may or may not turn out to be one of the world's most valuable safe havens."
The two Goldman speakers on the call, its head of research and a Harvard economics professor, said several bitcoin forks, which they refer to as "nearly identical clones," occupy three of the six largest cryptocurrencies by market value. With this, Goldman inferred that cryptocurrencies as a whole "are not a scarce resource," according to the presentation.
