Published: August 12th, 2020
The Goldman Sachs Group, Inc., an American multinational investment bank, is planning to launch a fiat-pegged digital currency. According to the report, the bank will release the coin in the next few months. The move comes as a surprise considering that Goldman Sachs has been indifferent to cryptocurrencies since 2018. Also, it is not clear if general investors will access bank-operated stablecoins, or if they want to.
The Goldman Sachs Group, Inc., a leading American multinational investment bank, may soon launch its stablecoin. According to the bank’s global head of digital assets, Matthew McDermott, the institution is investigating the commercial viability of launching a fiat-backed digital coin.
In other words, McDermott implies that his bank is thinking of releasing a cryptocurrency whose value is tied to either the U.S. dollar or any other national cryptocurrency of similar standing.
The available context suggests that the stablecoin will be anchored on a blockchain just like the Ethereum-based Quorum. McDermott said his bank is championing for a financial system where every asset or liability is native to a decentralized ledger or blockchain.
Goldman Sachs has invited Oli Harris, the former head of digital assets strategy at JPMorgan Chase & Co., to join its digital assets team.
Aside from Harris, Goldman is extending the scope of its personnel with prominent appointments in Asia and Europe. Harris was the leading figure in JPMorgan Chase Bank’s JPM Coin. He joins McDermott, who previously served as Goldman Sachs’s managing director for internal funding operations. Together, they will steer Goldman Sachs’s blockchain ambitions.
In his initial interview as the bank’s digital assets point man, McDermott said his team has both near-term objectives and some very ambitious and elaborate long-term objectives. Importantly, he said that all the projects have to be achievable within the mandate and tenure of the team. And, the projects must have clear commercial value to the bank and its collaborators.
McDermott said that his team’s priority is to refine the repo market and transform it into a digital vehicle. He thinks that improving the fluidity of finance to take care of aspects such as repurchasing agreements will give his bank an upper hand in the $1 trillion-a-day marketplace.
McDermott said that repo and securities finance is ready for standardization.
He believes that the various legacy processes that facilitate the vast transfer of collateral make them cost-inefficient. By leveraging the blockchain technology, it is possible to standardize the processes and manage collateral flow across the system, creating an efficient settlement process while at it, McDermott added.
The senior executive said that despite these early assumptions, the bank’s stablecoin is in its infancy. The bank is still weighing various potential use cases. As such, it will not be a surprise if the plans moved away from the distributed ledger technology.
The news of a stablecoin from Goldman Sachs does not come as a surprise even though the bank only recently castigated Bitcoin and cryptocurrencies in general. Before the recent diatribe where the bank warned its customers from considering Bitcoin as a viable investment tool, the bank has in the past dipped its foot in the blockchain pool several times.
The bank has been toying with the idea of launching a trading desk along with crypto custody services since 2018. Probed for a comment, the bank denied that any of its previous blockchain plans have ever been concrete.
However, the bank’s CEO, David Solomon, is on record saying that his institution is watching the crypto market is it evolves. In 2019, the bank came closer to crypto services when Solomon told a press conference that his bank was exploring the viability of tokenizing financial assets.
Outside of its ventures, Goldman Sachs has previously backed several blockchain and cryptocurrency businesses such as BitGo and Circle.
If Goldman Sachs succeeds in its venture, it will not be the first. Many other banking institutions have in the past launched or shown interest in putting their coins out to the market. In June 2019, JPMorgan Chase Bank launched JPM Coin, a dollar-backed, value cryptocurrency to speed up interbank transactions carried out on the 300-member banks’ Interbank Information Network (IIN).
About a year earlier, Signature Bank introduced its Signet System, a private, dollar-backed crypto coin that helps its clients to move millions of dollars across the blockchain daily. And, in September 2019, Wells Fargo & Co. announced that it was testing a blockchain-powered digital currency to help it move value between its branches and across borders in real-time.
Overall, all banks involved in cryptocurrency-based solutions aim to eliminate intermediaries that often extend timelines associated with every transaction. For instance, the head of innovation at Wells Fargo, Liza Frazier, said their project is meant to help the bank cut the cost of doing business.
Bank stablecoins often target institutional users. Therefore, it is not clear now if the many coins that banks are developing will be of use to the general public. Goldman Sachs has approached the public cryptocurrency trading scene with scepticism and indifference. In an earlier release, its senior executive even labelled the market as a bubble that is only comparable to the dot-com era and the tulip mania.
Meanwhile, global cryptocurrency and blockchain investors are also doubtful of bank-backed stablecoins. Such entrepreneurs believe that stablecoins operated by banks give these institutions too much power and the right to control their customers’ transactions. This belief goes against the key objective of Bitcoin; to revert control of financial resources to the owners.
Goldman Sachs, one of the very large global investment banking enterprises, is planning to launch a dollar-backed stablecoin. The investment bank, which has been indifferent to cryptocurrencies as viable investment vehicles, hopes its coin will hasten business processes while cutting the cost of transactions. A senior bank executive in charge of the process, however, cautions that the project is still in its infancy and that much can still change before the final product is officially unveiled.