Lloyd Blankfein, the current head of Goldman Sachs, took a balanced tone on cryptocurrencies when he addressed the New York Economic Club on June 19, 2018. Unlike many in the established financial community, Goldman’s CEO admitted that if cryptos became the next form of widely used currency, he would be able to understand why.
Many who work in the current financial system have expressed skepticism over the viability of cryptocurrencies, and in the last few days, the Bank for International Settlements released a report that was highly critical of cryptos as a replacement for fiat currency. Mr. Blankfein compared them to cellphones, which he didn’t think would be popular, but ended up proving him wrong.
To be sure, this is an evolution in the way that major investment banks see cryptos.
Last year, Mr. Blankfein suggested that cryptos were used primarily to commit fraudulent acts, though, to his credit, bitcoin was widely used on the now-defunct online drug marketplace, Silk Road. The idea that cryptos have no legal purpose is now a thing of the past, and many major banks are offering their customers ways to buy and sell cryptocurrencies.
Goldman Sachs is only one of many banks that now give their customers the ability to buy and sell derivatives that base their value on price movements in the bitcoin market.
Institutional investors now have numerous options when it comes to gaining exposure to bitcoin. Susquehanna Financial has gone one step further than many banks, and instead of offering their clients a derivative contract that tracks bitcoin, they let their clients buy and own the underlying cryptos themselves.
This move required that Susquehanna do more to ensure their clients’ holdings against theft, which could give them a competitive advantage as cryptos become more popular as an asset class.
In his address, Lloyd Blankfein also said that it was “too arrogant” to think that cryptos will be unsuccessful just because they are currently “unfamiliar.” Paper money went through a similar evolution to cryptos, with many very suspicious of the modern fiat currency system that is accepted all over the world today.
But Not For Him
Even with the recent surge in popularity for cryptos, they just aren’t for Lloyd Blankfein. He also said that he “doesn’t do bitcoin” and that he has no stake in it at a personal level. Given the almost universal dislike that cryptos received from Wall Street until recently, this should come as no surprise.
Now that numerous other banks are dealing in cryptos, Goldman’s acquiescence to trading in crypto derivatives could be seen as little more than a necessary move to remain competitive. With so many investors looking for ways to gain exposure to a rapidly growing market, Goldman probably would’ve been shooting themselves in the foot if they ignored cryptos for much longer.
Nicholas Say was born in Ann Arbor, Michigan. He has traveled extensively, lived in Uruguay for many years, and currently resides in the Far East. His writing can be found all over the web, with special emphasis placed on realistic development, and the next generation of human technology.