Goldman Sachs considering derivative products in crypto

Goldman Sachs is considering integrating crypto-based derivative instruments into its offering.

Goldman Sachs will expand its offering with derivative investment instruments with underlying crypto

According to press rumours, the American investment bank, Goldman Sachs, is in talks with the cryptocurrency exchange FTX to promote new derivative investment products in cryptocurrencies to its customers. 

According to reports in the Financial Times, the CEOs of the two companies recently held a closed-door meeting in which they discussed the possibility of a partnership between the two companies in order to bring FTX’s derivative products into compliance with US Commodity Futures Trading Commission (CFTC) standards.

In addition, according to the City’s financial newspaper, the two would also discuss the possibility of bringing FTX to listing on the Nasdaq, as Goldman Sachs did a year ago with Coinbase. 

Recently in a round C financing, FTX raised $400 million, resulting in a total valuation of over $30 billion, with $10 billion daily trading volumes and over 1 million users.

The Bahamas-based exchange recently asked the CFTC to change a rule requiring it to use brokers to secure all of its derivatives transactions. It is very likely that this was also discussed at the meeting and how this could be achieved, with the advice of the US banking giant, which is currently acting as an intermediary for FTX.

The close collaboration between Goldman Sachs and FTX

Brett Harrison, President of FTX’s US subsidiary, said in an interview with Barron’s:

“We have multiple FCMs already committed to integrating technologically with the exchange. There are several large ones you can probably name”.

A collaboration of this kind between Goldman and FTX would likely be a big signal of change in the assessment of the crypto world by traditional finance. 

Many investment banks are radically revising their opinion on cryptocurrencies, which until two years ago were described as little more than a scam with no intrinsic value.

During a call with investors in 2020, Goldman had stated about digital assets: 

“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”.

Now, however, according to sources close to the bank, this deal with FTX would give the bank the opportunity to offer direct futures trading, customer introductions and a ramp function, or the provision of capital top-ups for customers.

Recently, FTX CEO Sam Bankman-Fried attended a hearing of the chairman of the CFTC at the Senate Agriculture Committee, where the committee called for more powers to regulate cryptocurrency markets to prevent fraud and protect consumers. 

The CEO of FTX himself, as well as many other players in the crypto world, have long been calling on the authorities for clear regulation of the sector, which would primarily benefit the market players themselves.