Goldman Sachs digital assets chief sees ‘huge appetite’ for blockchain assets
Goldman Sachs, the Wall Street heavyweight, is expecting a significant increase in trading volumes of blockchain-based assets within the next one or two years, according to Mathew McDermott, the bank’s global head of digital assets. McDermott also noted an uptick in client interest in crypto derivatives trading, particularly as markets anticipate the approval of a spot bitcoin exchange-traded fund (ETF) by the U.S. securities regulator.
While bitcoin has seen a 50% increase this quarter, McDermott remains focused on developing digital assets beyond cryptocurrency. He highlighted the issuance of blockchain-based tokens to represent traditional assets such as bonds, citing a growing appetite for digital assets in the past year.
Traditionally, banks have shown interest in using blockchain technology for trading assets other than cryptocurrencies. However, implementing blockchain on a large scale would require substantial changes to the underlying technology infrastructure of financial markets.
McDermott believes that leveraging blockchain technology in trading could bring about operational and settlement efficiencies, suggesting that collateral and liquidity could be transferred more quickly and accurately between parties.
The journey towards adopting blockchain technology in financial markets has not been without challenges. Australia’s stock exchange, for example, halted its seven-year project to rebuild its software platform around blockchain, signaling potential roadblocks to implementing the technology.
McDermott predicts a significant increase in on-chain trading volumes in the next one to two years, but thinks fully replicating financial markets exclusively on blockchain is still a long way off. A survey conducted by Goldman Sachs found that 16% of respondents expect more than 10% of the financial market to be tokenized within the next three to five years.
Regarding cryptocurrency derivatives trading, McDermott noted that Goldman Sachs runs a team trading these derivatives, but not the underlying crypto assets, for institutional clients. Although the cryptocurrency derivatives market is small, McDermott believes that the potential approval of a bitcoin ETF could attract new institutional investors and provide the market with more scale.
According to McDermott, having the ability to transact familiar products at scale is a positive development for the industry, even if the approval of a bitcoin ETF does not lead to an immediate spike in liquidity and price.
Goldman Sachs’ digital assets chief expressed optimism about the future of blockchain and digital assets. However, he maintains that the market is still evolving and predicts it will take time to reach maturity. McDermott emphasized the growing appetite for digital assets and the potential benefits that blockchain technology can offer the financial industry in terms of efficiency and risk reduction.
In the pursuit of digital transformation, financial institutions like Goldman Sachs continue to explore the possibilities offered by blockchain technology. While challenges and complexities remain, they remain committed to harnessing the potential of digital assets and anticipate significant growth in the coming years.
(Reporting by Elizabeth Howcroft; Editing by Kirsten Donovan)
