Goldman Sachs Becomes First Major Bank to Execute OTC Crypto Trade

Banking giant Goldman Sachs has become the first major financial institution in the United States to trade crypto assets over the counter (OTC).

First reported by CNBC, Goldman traded a Bitcoin-backed non-deliverable option issued by crypto merchant bank Galaxy Digital. The two firms told CNBC that Goldman will essentially be taking on more risk with the instrument in comparison to the exchange-based CME Bitcoin products that the bank started trading last year.

Galaxy co-president Damien Vanderwilt says that Goldman’s move is a sign of maturity in the asset class for the bigger institutional players. Vanderwilt said in an interview:

“This trade represents the first step that banks have taken to offer direct, customizable exposures to the crypto market on behalf of their clients.”

The options trades are “much more systematically relevant to markets compared to cleared futures or other exchange-based products,” Vanderwilt said. “At a high level, that’s because of the implications of the risk banks are taking on; they’re implying their trust in crypto’s maturity to date.”

“We are pleased to have executed our first cash-settled cryptocurrency options trade with Galaxy,” Max Minton, Goldman’s Asia Pacific head of digital assets, told CNBC in a statement. “This is an important development in our digital assets capabilities and for the broader evolution of the asset class.”

The banking titan’s embrace of the crypto industry contrasts with its previous, less-than-favourable stance on the space.

As early as May of 2020, Goldman said in a report that cryptocurrencies, including Bitcoin, were “not an asset class,” and stated that "We believe that a security whose appreciation is primarily dependent on whether someone else is willing to pay a higher price for it is not a suitable investment for our clients."

The bank also questioned the notion of Bitcoin’s scarcity, noting that while there was a limited supply of BTC, it was negated by the many different forks such as Litecoin (LTC), Bitcoin Cash (BCH), and hundreds more.

Earlier this year, former Goldman Sachs CEO and Chairman Lloyd Blankfein conceded that crypto was in fact “happening.”

“Look, my view of it is evolving,” Blankfein said. “I can’t predict the future, but I think it’s a big thing to be able to predict the present, like, ‘What is happening?’ And I look at the crypto, and it is happening.”