In yet another about-face, financial services giant Goldman Sachs is considering offering custody services for crypto funds. The news comes less than a week after the firm’s chief investment officer, Sharmin Mossavar-Rahmani, predicted further price declines and more doom and gloom for the cryptocurrency market.
“We are at war with Eastasia. We’ve always been at war with Eastasia.” – George Orwell, 1984
I can’t help it. Every time I see that another mainstream financial institution has flip-flopped their stance on cryptocurrencies – again – that’s where my mind goes.
Goldman Sachs’ on-again-off-again support of cryptocurrencies might just be on again as “people with knowledge of the matter” told Bloomberg that the firm is considering offering custody services for crypto funds. For those unfamiliar with the term in this context, “custody” is a service that brokerages and other financial institutions often offer in which they hold securities on behalf of their clients.
In traditional finance, custody offers two benefits:
- It reduces the risk of clients losing their assets or having them stolen.
- Since the brokerage is holding the securities, they can easily be sold at the client’s request.
If Goldman Sachs follows through with its plans for a custody offering, the firm would hold various digital assets for crypto funds, which reduces risk for the funds’ clients who want to protect their crypto investments from “rogue attacks”. As far as selling digital assets on behalf of its clients, I wouldn’t bet the farm on it just yet.
A spokesperson for Goldman Sachs explains:
In response to client interest in various digital products we are exploring how best to serve them in this space. […] At this point we have not reached a conclusion on the scope of our digital asset offering.
Custody Could Offer More Than Just Security
While a custody offering from Goldman Sachs would be a boon to crypto funds in terms of digital asset security, there are other potential benefits as well. Like it or not, a crypto custody offering from a financial institution like Goldman Sachs could go a long way toward lending much-needed mainstream credibility to the cryptocurrency market which, in turn, would lead to more investors entering the space.
Of course, having a custody operation already in place could pave the way for Goldman Sachs to consider other ventures such as brokerage services, ICO underwriting, and – who knows – maybe even its own exchange.
There are definite possibilities in this latest baby step being taken by Goldman Sachs, however, it remains to be seen whether or not they will actually go through with it.
What are your thoughts on this latest move by Goldman Sachs? How would you compare it to Coinbase’s custody service? Let us know in the comments below.
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