Goldman Sachs Head of Digital Assets Outlines Blockchain Strategy

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Last year’s havoc in the cryptocurrency space has enabled a “flight to quality” among crypto investors, Mathew McDermott, global head of digital assets at Goldman Sachs, told Crypto World on Friday. CNBC.

“We have a crypto trading desk within the company,” he said, noting that the bank only trades cash-settled derivatives, options and futures.

Cryptocurrencies suffered in 2022 as investors avoided risky assets. Bitcoin has fallen over 60% in the past year. The collapse of crypto exchange FTX, along with the collapse of other crypto-related companies, has also raised concerns about the need for federal agencies to step in and regulate the industry.

Since then, major investors who continue to participate in the space have become more discerning.

“What we’ve seen more of our larger customers eager to onboard and trade with what they probably perceive to be much better regulated and capitalized entities,” McDermott added, noting that this has been a byproduct of Last year.

Three key areas

Speaking to CNBC’s “Crypto World,” McDermott highlighted the bank’s three main areas of interest in crypto: tokenization, reshaping the plumbing of financial markets, and the “profound” effect that the digital money will have in the markets.

“The excitement on our side is…to see how this technology can impact many different parts of the financial system and have real business impact,” he added. “We’re at such an early stage in terms of adoption, but when you look across the market and see the scope of financial institutions that are building their digital asset teams, their digital asset strategies, that whether it’s on the sell side or the buy side, it’s just super exciting and I think there’s real recognition there.”

Together with two other banks, Goldman Sachs launched a tokenization platform that processed a $100 million Eurobond from the European Investment Bank.

“One of the things from my perspective that’s been pretty big is really demonstrating that we can apply the technology across all geographies,” McDermott said. “We’ve done something in Europe and as we continue to grow, we’re very excited to do it more widely across the world.”

CNBC was first to report in November that Goldman Sachs had also collaborated with crypto data firm Coin Metrics and financial firm MSCI to create a new classification system called Datonomy, which McDermott says essentially provides a framework for investment in the new asset class.

“We thought that was a really important kind of functionality for the market,” McDermott said, describing Datonomy.

“We wanted to provide something for clients that gave them the tools to analyze better, and especially those looking to think about investing, just give them that skill set, or certainly the details to allow them to do that. ‘a smarter way,’ he said.

A silver lining of the ravages of 2022

The collapse of FTX in late 2022 and the domino effect that wiped out other crypto companies contributed to traditional financial institutions, like Goldman, being presented with “more reasonable” valuations for potential investment in the technology that underlies cryptography, according to McDermott.

“There’s been this precipitous drop in valuation of many companies related to the crypto market,” McDermott said. “But really the area that we’ve been focusing on, blockchain infrastructure, we’ve continued to see some really exciting opportunities in well-run businesses.”

McDermott noted that Goldman Sachs has made investments in the digital asset space, focusing primarily on blockchain infrastructure and that the bank “sees attractive opportunities there at valuations that just seem a lot more reasonable.” .

Goldman Sachs has 11 crypto companies in its portfolio, including Coin Metrics, infrastructure firm Blockdaemon and the bank’s newest investment, TRM Labs.

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