Goldman Sachs Begins ETH-Linked Derivative Products
Recently, Goldman Sachs has teamed up with Coinbase to come out with the first crypto-backed loan.
Goldman Sachs Group Inc (NYSE: GS) has announced to have begun Ethereum-linked derivative products after it was first suggested in June 2021. According to the bank, this becomes its first over-the-counter non-deliverable forward (NDF) crypto trade on Ether. It is worth noting that a non-deliverable forward by Goldman Sachs is a derivative contract that allows individuals to get exposure to an asset without necessarily owning it.
In the case of Goldman Sachs, the trade was set up by “Marex Solutions, Marex’s hedging, and investment solutions division”. The decision of the bank about cryptos has largely been influenced by an institutional interest. Its crypto interest was relaunched in 2021 but focused on derivatives tied to assets like Bitcoin. The development of the bank also discloses the rising interest of institutions despite the crypto market pullback.
Recently, Goldman Sachs teamed up with Coinbase Global Inc (NASDAQ: COIN) to come out with the first crypto-backed loan. As disclosed by the report, Coinbase used Bitcoin as collateral to secure a cash loan from the bank.
Many reports have also stated that banks and other financial institutions are establishing internal crypto working groups and trading desks. Visa’s crypto-linked credit card usage has, for instance, hit $2.5 billion.
In January 2021, the bank was reported to have requested information to explore digital asset custody. This was inspired by the Request for Information on digital custody issued by JPMorgan Chase & Co (NYSE: JPM) in October 2020.
“Like JPMorgan, we have issued an RFI looking at digital custody. We are broadly exploring digital custody and deciding what the next step is,” said a source at Goldman Sachs. “Anchorage, BitGo, and Coinbase have quite grand plans in crypto prime brokerage and we would not be looking to duplicate those,” the source added.
Institutional Investors Hesitant Over Regulatory Uncertainty
As the involvement of institutional and retail investors is expected to push the crypto market back to the top, many crypto enthusiasts have called for regulatory certainty to reduce the risk, and compliance worries and increase adoption rates. US President Joe Biden has signed an executive order highlighting a more coordinated approach to provide the understanding and future legal certainty for digital assets.
The US Securities and Exchange Commission (SEC) has also shown a great interest in crypto trading platforms and tokens as they have been said to be similar to normal securities and must follow the same rule. Many institutional investors have disclosed that they are willing to invest in digital assets but are a bit hesitant with the regulatory environment. Politicians in Europe have also decided to pass a bill that will flag all anonymous crypto transactions as illegal. However, this is said to be a threat to privacy and innovation.