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Goldman CFO Calls Report They’re Dropping Bitcoin Trading Desk “Fake News”

September 7, 2018
Giancarlo Roma


Goldman CFO Calls Report They’re Dropping Bitcoin Trading Desk “Fake News”

Bitcoin’s long term prospects were dealt a sizeable blow on Wednesday when a Business Insider report claimed Goldman Sachs was ditching its plans to open a cryptocurrency trading desk. The company had announced in May that it would be offering forward bitcoin products, making it the first Wall Street bank to do so. The news sparked optimism that other large banks would follow suit, but those hopes seemed dashed earlier this week, leading Bitcoin to dip back under $7,000, and the top 5 coins to fall by 12%.

However, Goldman’s CFO Marty Chavez is refuting this report, going as far as to call it “fake news” at a TechCrunch Disrupt event.

“I was in New York yesterday and I was co-chairing our risk committee, and I saw the news article,” said Chavez, referencing the report. “It wasn’t like we announced anything or that anything had changed for us… I never thought I’d hear myself actually use this term, but I’d really have to describe that as fake news.”

Bitcoin’s price remains largely driven by speculation, and now that cryptocurrency has reached national consciousness — primarily due to the rally at the end of 2017 — much of that speculation largely centers around the promise of a positive macro event, specifically some form of acceptance on the institutional level.

Unlike other major Wall Street banks that initially came out against Bitcoin, Goldman has been fairly consistent on their acceptance of cryptocurrency. In October, a Goldman spokeswoman told CNBC, “In response to client interest in digital currencies, we are exploring how best to serve them in this space,” and in the same month, CEO Lloyd Blankfein tweeted that Goldman was “still thinking about Bitcoin.”

But Chavez also cautioned that any excitement about Goldman’s trading desk might be a bit premature.

“When we talked about exploring digital assets that it was going to be exploration that would be evolving over time,” Chavez said. “Maybe someone who was thinking about our activities here got very excited that we would be making markets as principal and physical Bitcoin, and as they got into it they realized part of the evolution but it’s not here yet.”

The products that Goldman initially plans to offer are forward in nature, meaning they would not need to buy, hold, or sell any actual Bitcoin. While still a positive step forward for Bitcoin, it is a far cry from Goldman committing to act as a market maker, which would require them to purchase and hold a significant number of Bitcoin, creating demand for the currency and hence driving the price up. Chavez explained:

“Our institutional clients said, ‘We would love for you to clear these new Bitcoin-linked futures contracts offered by the exchanges,’ so we’ve been doing that, and then clients since May [started asking], ‘We would like for you also to provide us liquidity and trade the principal as principal the futures contracts, not just clear them,’ and so we’ve been doing that, the next stage of the exploration, what we call ‘non-deliverable forwards.’

“These are derivatives, over the counter derivatives,” he continued. “They’re settled in U.S. dollars and the reference price is the Bitcoin U.S. dollar price established by a set of exchanges, the same one that’s referenced in the futures contracts, and we’re working on that now because the clients wanted physical Bitcoin — something tremendously interesting and tremendously challenging. From the perspective of custody, we don’t yet see an institutional grade custody cases custodian solution for Bitcoin.”

Although large companies like Coinbase have made forays into providing custodial services for institutions looking to enter the cryptocurrency market, Goldman has offered no timeline of its own such plans. Still, they have not ruled it out, and the fierceness with which their CFO rejected such claims may suggest it is very much in play going forward.