You can thank Goldman Sachs for the cryptocurrency bloodbath.
Reportedly, the firm has backed down on plans to start its dedicated cryptocurrency desk. Bitcoin is down another 10.2% this morning. Ethereum is down 15%.
And Litecoin slipped another 14%.
While Goldman’s reasons for doing so make sense, it doesn’t make it any less painful
They backed down because of continued uncertainty regarding regulation. Steps still need to be taken before a regulated bank can be allowed to trade cryptocurrency.
“At this point, we have not reached a conclusion on the scope of our digital asset offering,” Goldman Sachs said, as quoted by Reuters.
The Good News
Fortunately, the firm is not going to fully reject crypto trading.
It’ll still focus on a custody product for cryptocurrency. That will allow it to hold digital coins on behalf of large clients and track its price.
That means Goldman would hold the securities on behalf of the funds, which then cuts the risk for clients worried about potential loss. Should that happen, the bank could provide quite a boost to the number of funds betting on virtual currency.
The best part — Goldman wouldn’t be the only bank to enter the custody space.
Earlier this year, Nomura created a custody consortium called Komainu. Even Bank of New York Mellon Corporation, JP Morgan Chase, and Northern Trust are “working on cryptocustody services or exploring it.”
In addition, the Intercontinental Exchange (ICE) also entering the race for custody.
Even the NASDAQ is open to becoming a platform for trading cryptocurrencies.
“Certainly Nasdaq would consider becoming a crypto exchange over time,” Nasdaq CEO Adena Friedman told CNBC. “If we do look at it and say & ‘it’s time, people are ready for a more regulated market’ for something that provides a fair experience for investors.”
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