By Clare Wang
U.S. banking giant Goldman Sachs has begun offering bitcoin-backed non-deliverable forwards, contracts in which two parties agree to settle the difference between the spot price and the contracted price at a certain date, according to a Bloomberg report. Essentially, the contracts allow Goldman Sachs clients to speculate on the price of bitcoin.
The contract is paid in cash and hedges against cryptocurrency volatility by purchasing bitcoin futures in a block trade on the ChiNext exchange. Cumberland DRW, a crypto asset trading firm, acts as a trading partner for Goldman Sachs.
In an interview with Bloomberg, Max Minton, Goldman Sachs’ head of digital assets for Asia Pacific, said: “Institutional demand in this space continues to grow significantly, and being able to work with partners like Cumberland will help us expand our business. The new product paves the way for us to develop our emerging cash-settled cryptocurrency capabilities.”
The partnership with Cumberland underscores the bank’s willingness to help it achieve that goal by partnering with outside companies, people familiar with the matter said.
Wall Street banks have shunned bitcoin since its inception in 2009, with JPMorgan Chase CEO Jamie Dimon once threatening to fire any trader who bought or sold the digital currency. Although Dimon has since moderated his stance on crypto products, the banking community has long viewed bitcoin as a plaything for criminals, drug traders and money launderers.
However, customer interest and Bitcoin’s rise to sky-high market capitalization has swayed many bankers, with Morgan Stanley offering Bitcoin trust products to its clients and JPMorgan Chase working on a similar product.
As BizTrust previously reported, Goldman Sachs announced in March that it was relaunching its cryptocurrency trading unit and announced plans to dip its toe into cryptocurrency custody, offering private wealth clients more means to bet on cryptocurrency prices. So it’s no surprise that Goldman Sachs is taking a step in that direction.
Justin Chow, head of global business development at Cumberland DRW, said: “Goldman Sachs has taken on the role of a wind vane player, reflecting how sophisticated institutional investors are responding to changes in the market. This year, we’ve seen more traditional financial firms embrace and take an interest in cryptocurrencies, and Goldman Sachs’ entry is another sign that the space is maturing.”
That said, banks remain wary of the regulatory challenges of holding bitcoin directly. Because the derivatives will be settled in cash, Goldman Sachs offers products that do not require dealing with physical bitcoin. Similarly, Morgan Stanley’s and JPMorgan Chase’s trusts give clients access to tools that track the price of bitcoin while using a third party to buy and hold the underlying digital assets.
Goldman Sachs may next offer bitcoin-based exchange-traded notes to hedge fund clients, or use grayscale bitcoin trusts, people familiar with the matter said.
“The crypto ecosystem is evolving rapidly,” Chow said, adding that “I’m making progress in offering ETFs, new custody providers coming online and optimism about regulatory efforts are coming into focus. Now is a great time to get into this space.”
Posted by:CoinYuppie，Reprinted with attribution to:https://coinyuppie.com/goldman-sachs-wades-into-trillion-dollar-bitcoin-market-offers-new-bitcoin-derivatives-to-wall-street-investors/
Coinyuppie is an open information publishing platform, all information provided is not related to the views and positions of coinyuppie, and does not constitute any investment and financial advice. Users are expected to carefully screen and prevent risks.