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LONDON, December 6 (Reuters) – Goldman Sachs (GS.N) He plans to spend tens of millions of dollars buying or investing in cryptocurrency companies after the FTX exchange collapse hit valuations and dampened investor interest.
Matthew McDermott, Goldman’s head of digital assets, said the implosion of FTX has increased the need for more trusted and regulated cryptocurrency players, and big banks see an opportunity to get into business.
Goldman is conducting due diligence on a number of different cryptocurrency companies, he added, but did not provide further details.
We see some really interesting opportunities with smarter pricing, McDermott said in an interview last month.
FTX filed for Chapter 11 bankruptcy protection in the US after its dramatic collapse on Nov. 11, sparking contagion fears and amplifying calls for more crypto regulation.
It definitely puts the market back in terms of sentiment, no doubt about it, McDermott said. FTX has been a staple in many parts of the ecosystem. But again, the underlying technology will continue to work.
The amount Goldman could potentially invest in isn’t huge for the Wall Street giant, which made $21.6 billion last year, but its willingness to continue investing amid a sector culling is what it feels is a long-term opportunity. It shows that there is
The company’s CEO, David Solomon, told CNBC on Nov. 10 that when the FTX drama unfolded, he considered cryptocurrencies “very speculative,” but its infrastructure was becoming more formalized. He said that as he grew, he saw many possibilities in the underlying technology.
Rivals are more skeptical.
“We don’t see it as a fad or a fad, but we can’t add intrinsic value,” said Morgan Stanley. (MS.N) CEO James Gorman said at the Reuters NEXT conference on December 1:
HSBC (HSBA.L) Meanwhile, CEO Noel Quinn said at a banking conference in London last week that there were no plans to expand into cryptocurrency trading or investments for individual customers.
Goldman invests in 11 digital asset firms that provide services such as compliance, cryptocurrency data and blockchain management.
A recreational triathlete, McDermott joined Goldman in 2005 as head of cross-asset finance before moving on to run the digital assets business.
His team has grown to over 70 people, including 7 powerful crypto options and derivatives trading desks.
Goldman Sachs, along with MSCI and Coin Metrics, also launched Datanomy, a data service aimed at classifying digital assets based on how they are used.
The company is also building its own distributed ledger technology, McDermott said.
According to data site CoinMarketCap, the global cryptocurrency market has peaked at $2.9 trillion in the second half of 2021, but is expected to hit about $2.9 trillion this year as central banks tighten credit and a string of high-profile corporate bankruptcies. We lost $2 trillion.
The fallout from the FTX debacle has boosted Goldman’s trading volumes, McDermott said, with investors seeking deals with regulated and well-capitalized counterparties.
What is increasing is the number of financial institutions wanting to do business with us, he said. “Many of them were supposedly traded on FTX, but I can’t say that with cast iron certainty.”
McDermott said Goldman also sees hiring opportunities as cryptocurrency and tech companies cut jobs, but is happy with the size of the team at the moment.
Others see the cryptocurrency meltdown as an opportunity to build a business.
Britannia Financial Group is building a cryptocurrency-related service, chief executive Mark Bruce told Reuters.
The London-based company is eager to diversify into digital currencies but aims to serve customers who have not done so before. It also caters to investors who have been nervous about storing their money on cryptocurrency exchanges since the collapse of .
Britannia is applying for more licenses to offer crypto services, including trading for wealthy individuals, he said.
Customer interest has increased since the demise of FTX, he said. Customers have lost faith in some of the young purely cryptocurrency players in the space and are looking for more reliable trading partners.
Reporting by Iin Withers and Lawrence White; Editing by Lananh Nguyen and Alexander Smith
Our criteria: Thomson Reuters Trust Principles.
