Is This About Survival? Goldman Sachs Considers A Bitcoin-Trading Operation

Is This About Survival? Goldman Sachs Considers A Bitcoin-Trading Operation

Wall Street is divided on whether bitcoin is a good thing or not, but there seems to be consensus that the blockchain technology underpinning the cryptocurrency is awesome.

Goldman Sachs is considering trading in bitcoin and other digital currencies, and although it’s still early days, this could make Goldman the first major Wall Street firm to deal directly in this fast-growing but controversial market, Wall Street Journal reported:

“The firm’s interest could boost bitcoin’s standing among investors and fuel the debate around digital currencies, which were initially viewed as havens for illicit activity but are pushing further into the mainstream investment world.”

Goldman has an elaborate web page explaining blockchain. Having reported a 40 percent drop in bond trading in the second quarter, Goldman could benefit from a new trading operation in a volatile asset like digital currencies, according to CNBC.

By contrast, JPMorgan CEO Jamie Dimon has repeatedly criticized bitcoin and digital currencies, warning that governments will close down bitcoin and cryptocurrencies if they get too big, CNBC reported.

Dimon called cryptocurrencies a novelty, fraudulent and “worth nothing,” saying they are not a fiat currency formed by a government and backed by a central bank.

However, Dimon said he admires the blockchain technology underpinning bitcoin.

“Blockchain is a technology that can be used for multiple things, including cryptocurrency. It could be used for digital dollars, and there are digital dollars already; a lot of the dollars held in our bank are digital,” Dimon said.

A company called Blockswater has filed a market abuse complaint in Sweden against Dimon for spreading false and misleading information about bitcoin.

“Comments like Jamie’s show a failure to grasp the significance of the blockchain and the power of brand in a fundamental sea of change,” said Scott Nelson, chairman and CEO of blockchain firm Sweetbridge, in an email to CNBC.

Bitcoin price has risen this year from less than $1,000 to more than $5,000. The digital currency fell by about $2,000 after China cracked down on cryptocurrencies in September, but bitcoin recovered to around $4,410 today, according to CoinDesk.

Institutional investors are increasing their bets on the digital currency. Financial research firm Autonomous Next estimated about 75 new “crypto-funds” now exist, according to CNBC.

Morgan Stanley CEO James Gorman has a more measured view on the cryptocurrency than rival Dimon, according to Bloomberg. Gorman said he hasn’t invested in it, but “I’ve talked to a lot of people who have. It’s obviously highly speculative but it’s not something that’s inherently bad. It’s a natural consequence of the whole blockchain technology.”

“The concept of anonymous currency is a very interesting concept,” Gorman said last week at an event held by the Wall Street Journal. “interesting for the privacy protections it gives people, interesting because (of) what it says to the central banking system about controlling that … Bitcoin is certainly something more than just a fad.’”

Goldman Sachs has looked more seriously at bitcoin than its Wall Street peers, CNBC reported. “In response to client interest in digital currencies, we are exploring how best to serve them in this space,” a Goldman spokeswoman told CNBC.

Reports from Morgan Stanley and a few other major banks have focused more on the potential applications of blockchain, the technology behind bitcoin that eliminates the need for third-party intermediaries to transact money.