September 12, 2017 will go down in infamy when talking about the relationships between traditional fiat financial institutions and their views on cryptocurrency. It was the day that JP Morgan CEO, Jamie Dimon, called Bitcoin a ‘fraud’.
A lot has happened in the financial and crypto space in the eight months following that event, especially in terms of banking institutions and Wall Street’s perception of Bitcoin and cryptocurrencies. As Bitcoin started making a few waves in traditional finance, Wall Street-types were polarized. Some scoffed at the idea of digital, decentralized currency, while others took note and saw potential.
It has now come to a point where the financial fiat sector is dipping more than just a toe into the cryptocurrency world; with futures trading now well established and blockchain experts being hired left, right, and centre. There is a definite race on now for major banks to start offering clients the chance to trade cryptocurrency through their offerings.
On May 3, Goldman Sachs, a financial institution that has done a turnaround in terms of its attitude towards cryptocurrency, announced that it does not believe Bitcoin is a fraud. This was a hark-back to those famous words from Jamie Dimon, but more importantly, they also announced their plans to start trading crypto.
Commenting on the decision, Rana Yared, an Goldman Sachs executive involved in creating the offerings, said the bank had been “inundated” with client requests.
“It resonates with us when a client says, ‘I want to hold Bitcoin or Bitcoin futures because I think it is an alternate store of value.’”
Goldman’s path to potentially get its own cryptocurrency desk up and running has taken a long and winding path.
In early 2014, Goldman declared that Bitcoin was not a currency, and also said separately that it is too risky for banking companies investors. However in 2017, Goldman was starting to consider letting investors trade Bitcoin directly, and also one of the top five most active corporate investors in blockchain technology.
It was at the end of Jan. 2018 when Goldman Sachs also refuted rumours that they were starting a crypto trading desk, but as it turns out, their stance may well be softening.
There are also rumors swirling around Barclays Bank potentially opening a crypto trading desk, but these too have thus far been refuted.
Barclays Group CEO Jes Staley picked out compliance and regulatory barriers as their biggest issue, but also spelled out this growing race to be ‘in the forefront of technology improvement in finance’:
“Cryptocurrency is a real challenge for us because, on the one hand, there is the innovative side of it and wanting to stay in the forefront of technology improvement in finance… On the other, there is the possibility of cryptocurrencies being used for activities that the bank wants to have no part of.”
Still, it has been reported that Barclays is gauging institutional demand for cryptocurrency to determine if the new business model is feasible. It has been said that a crypto-trading operation would require approval from Tim Throsby, CEO of Barclays International, and possibly Jes Staley.
A spokesperson at the bank later issued the following statement:
“We constantly monitor developments in the digital currency space and will continue to have a dialog with our clients on their needs and intentions in this market.”
Morgan Stanley is another major bank that looks to be in the race to open up this crypto-trading operation, more so, it looks to be focusing a lot of effort into being the first-to-market. Morgan Stanley and Goldman Sachs have a long standing rivalry, and in this ‘Arms Race’, the first to get a successful crypto trading desk up would take a lot of plaudits.
There are reports, from an unnamed source, that Morgan Stanley is focusing virtually all of its attention on cryptocurrency trading as of right now. The source from inside Morgan Stanley allegedly said:
“Several of us have been reaching out to what we would call ‘mid-tier’ money managers that we know are on the cusp of opening crypto focused hedge funds. We have done some work with pure-play crypto funds as well, but we’ve been more specifically tasked to engage with firms that are apt to add to their current portfolios as opposed to starting from scratch.”
“I can’t tell you who those are, as we are under NDA’s with several, but you can bet that things are moving quickly and deals are being struck. And you can guess why.”
“Goldman is taking a different track than we are and our directives seem to have them in our sights at the moment. If we are able to engage on a 1 on 1 basis, as opposed to through third parties [such as] Circle, then we ultimately lead in the space.”
The source goes on to liken this building towards crypto trading as an arms race between the two banks, but ultimately, they are not the only ones trying to reach the goal first.
“Truth be told this is the next arms race. Everyone is rushing into cryptos. Everyone. There isn’t a bank, a fund, a fund company, a former legend attempting to reclaim old glory, private equity, venture capital, lending, exchanges, consulting firms – everybody.”
Hitting the traditional exchanges
In this frenzy to appease customers and their want of cryptocurrencies, even the owner of the New York Stock Exchange (NYSE) is considering letting customers buy and hold Bitcoin. It is again a bit cloak-and-dagger as the source article from the New York Times cites “emails and documents” as well as four anonymous sources…