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Goldman Sachs Denies Plans for Crypto Trading Desk

Goldman Sachs Denies Plans for Crypto Trading Desk

David Solomon, the CEO of Goldman Sachs, has denied that the bank had ever made any plans for a cryptocurrency trading desk, claiming that earlier press coverage indicating otherwise had been incorrect in their reporting.

Solomon made these remarks at a hearing before the US House of Representatives Financial Services Committee this week. The Committee was holding a hearing for ‘Holding Megabanks Accountable: A Review of Global Systemically Important Banks 10 years after the Financial Crisis’.

Back in 2017, Bloomberg first broke the news about the bank’s supposed plans to open a unit focused on crypto trading in 2018, and by September, Business Insider was informed that the project was on hold and that a Bitcoin derivative was also being considered. Chief financial officer Martin Chavez would later dismiss these reports as “fake news”.

Solomon told the hearing that Goldman Sachs has engaged with clients involved in clearing physically-settled crypto futures, but flatly denied the plans for a crypto trading desk:

“The first [Bloomberg article] wasn’t correct. Like others, we are watching and […] doing work to try to understand the cryptocurrency market as it develops […] but we never had plans to open a cryptocurrency trading desk… We might at some point in time, but there’s no question, when you’re dealing with cryptocurrency, it’s a new area […] it is unclear from a regulatory perspective, it’s unclear whether […] in the long run, as a currency, those technologies are going to work and be viable.”

Ohio Republican Congressman Warren Davidson, who was questioning Solomon over the media reports, himself voiced his belief that the U.S. is lagging behind other countries and failing to “take advantage of this thriving sector [crypto]” due to regulatory uncertainty.

As Cointelegraph previously reported, other CEOs in attendance at the hearing included JPMorgan Chase CEO Jamie Dimon, who affirmed the value of blockchain technology but reiterated his belief that decentralized cryptocurrencies do not have any intrinsic value.

This week, a bill to exclude crypto from being classified as securities and foster more regulatory clarity was revised and reintroduced to Congress.

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Apple Card Vs Bitcoin: Privacy-Wise There Can Only Be One Winner

Apple Card Vs Bitcoin_ Privacy-Wise There Can Only Be One Winner

Apple’s new credit card product Apple Card has the crypto industry debating how it stacks up against Bitcoin as a payment option in terms of privacy and use protection and the consensus appears to be that Bitcoin will take a lot of beating.

The creators Apple Card have taken some major steps in protecting the consumer, particularly in the privacy area, keeping Apple’s access to data related to the card to a minimum, with no number printed on the new card with transaction history also placed back in the hands of the user.

These are clever steps, and Apple has clearly heeded consumer requirements in formatting a product which has client privacy at its center, although it is unclear at this stage if it takes a leaf out of Bitcoin’s well-leafed book and creates a different card number for each transaction, further protecting the user from unwanted marketing searches.

Apple’s partnership with Goldman Sachs means that the card data will pass through the hands of the Wall Street banking giant, although assurances have been given that Sachs won’t share this data with third parties for marketing or advertising. However, is this enough for the individual seeking true privacy?

Forbes argues that decentralized systems such as Bitcoin will still maintain the edge when it comes to protecting the consumer as centralized banking tweaked to offer more anonymity such as Apple Card will attract attention from regulators in exactly the same way that cryptocurrencies have since their increased popularity.

The track record for gold-backed digital currencies which protect user information is poor, with the French National Assembly president calling for the ban of privacy-focused cryptocurrencies like Monero and Zcash and multiple shutdowns of similar systems such as Liberty Reserve and E-gold being recorded.

As Forbes points out, Bitcoin still allows the processing of payments with a high degree of anonymity making the system less vulnerable government regulation, arguing, “…it’s effectively impossible to gain true financial privacy on the internet without the use of a system like Bitcoin.” This is not to say that Bitcoin developers have drawn a line under improving levels of privacy but have rather moved their attention on to creating a stable coin free from market volatility; no mean challenge in itself.

Nevertheless, Apple appears to have borrowed heavily from cryptocurrency in the development of its latest creation in terms of guarding user information, despite a past reluctance to value its credentials. Whether it is enough to satisfy Apple Card users remains to be seen.

 

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It’s On, Off, On again: Is Barclays Ringing the Changes with a Crypto Trading Desk?

It's On, Off, On again: Is Barclays Ringing the Changes with a Crypto Trading Desk?

With Barclays investing in the preliminary assessment of a cryptocurrency trading desk, the British multinational investment bank has shown that it hasn’t quite shrugged off the lure of crypto trading.

The bank has been skirting cryptocurrency for some time now. In April 2018, it entered the blockchain arena, with Barclays UK announcing a new ventures unit to study “disruptive technology”.

This was driven by Barclays UK Ventures unit with an aim to “develop new customer propositions around major areas of disruptive technology”.  A month later, rumors began to emerge that that Barclays was monitoring client responses to the possibility of opening a trading desk for cryptocurrencies, although the bank suggested it was simply monitoring the space.

Months later, the former head of trading at Barclays was given a new position as Head of Digital Assets Project: Barclays Investment Bank, while the director of oil options trading at the bank, Matthieu Jobbe Duval became Digital Assets Trading – Consultant at Barclays. This prompted investors to expect a statement, which never came.

Blockchain has never been far from Barclay’s development plans and the bank has become an active promoter in the fintech sphere, recently hosting the Blockchain Interoperability Hackathon at the Barclays Rise fintech hub in London.

Clearly this latest assessment by the bank shows that they still have one eye on the space and the needs of its customers; needs which have also been expressed by JPMorgan clients recently. Rumors also abound that Goldman Sachs is considering hiring for a cryptocurrency trading team.

Like its counterparts across the pond, Barclays still appear to be very much in the game.

 

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US Crypto Regulations Between a Rock and a Hard Place

US Crypto Regulations Between a Rock and a Hard Place

In the midst of the delay for the approval of Bitcoin exchange-traded fund (ETF) applications after several rejections, and current uncertainty regarding regulatory framework, US Securities and Exchange Commission (SEC) Commissioner Hester Peirce provided insights into the matter as an opportunity for better industry development.

Last week, Heister made comments on the issues of state regulation at the University of Missouri School of Law where she opined that “entrepreneurship and innovation do not have the happiest relationship with innovation”, which may be the core reason why crypto ventures have suffered in the hands of most regulatory systems.

The SEC’s clamp down on non-compliant ICOs (issuing securities disguised as utility tokens), its rejection of Bitcoin ETF applications, and somewhat deliberate delay in providing a regulatory framework as regards the industry may have a more logical than malicious intent behind it. Innovations, while they make life easier most of the time, always come outside the norms, especially those of the regulatory system and often times drives regulators to accept changes despite skepticism.

“Regulators, for their part, tend to be skeptical of change because its consequences are difficult to foresee and figuring out how it fits into existing regulatory frameworks is difficult,” she said, implying that it’s not an easy task for the SEC to reject what seemingly looks like a financial innovation in an attempt to weigh and understand the situation correctly.

The last financial crisis has made it easier for trust issues to thrive, especially on the part of the regulator, given that some ascribe the crisis to be due to “financial innovations”. Peirce pointed out that “…every innovation — even one that almost everyone agrees is good — carries with it some risk”, something currently agreeable with the cryptocurrency system.

Accordingly, since innovations can be unpredictable, so caution must be applied when drafting regulatory frameworks, especially for a new industry such as blockchain and its underlying assets. Peirce continues by saying that “as regulators, therefore, we must allow innovation to proceed, even as we put in reasonable safeguards and watch for unanticipated consequences”, and still, it has to come with no comprise to the securities laws in place. It behooves one to imagine where the true line of trade-offs will be drawn, seeing that the core structure of the crypto industry lies in decentralization, which by implication makes it harder for any regulator.

Still, the regulatory polarity has created distinct shades of gray areas around the world. With the Chinese government adamant with its crypto ban, the Indian government chose a rather bizarre stance — first with a ban on banking services to crypto related ventures, and then planned to develop a state-backed cryptocurrency, which it shelved later on. Meanwhile, other jurisdictions have launched out to attract the “rejected”, by providing a safe haven to crypto ventures, and a few nations are developing their own state-backed crypto to augment their economies.

In the UK, the principal regulator has extended an invitation to the public through its consultation paper to better assess a possible way forward for industry regulations. It said in late January: “We are consulting on Guidance for crypto assets to provide regulatory clarity for market participants.” Meanwhile, in the Middle East, the United Arab Emirates (UAE) has also hinted on possible ICO regulations to be introduced later this year.

So far, the crypto industry has had checkered developments and have more recently been in a stalemate (regardless of minor spikes in market dynamics), and many have been waiting eagerly for the next bull-run trigger. It’s basically what most crypto enthusiasts talk about these days, consequently, dialing down tech innovation, development and mass adoption of crypto products — at least, for the innovations that they stand for — and are relying on adjuncts gunning for more institutional involvement that would supposedly propel the market further.

While the US SEC does recognize the potential this innovative technology may provide, as Peirce says. “the United States has benefited greatly from the relative importance of non-bank financing”, supposedly placing them on par with the capital market. This further buttresses the point made by SEC boss Jay Clayton who viewed crypto as a “promise for adding efficiency to our [capital] marketplace”.

However, the regulatory watchdog maintains a stance of balance that involved protecting the interests of investors as market volatility, manipulation, hacks, frauds, exchange illiquidity, and a host of other unforeseen consequences from the unstandardized cryptosystem remain legitimate concerns.

Perhaps, when the SEC, as well as other financial regulators, have finally regulated the industry, these problems will be adequately tackled. Meanwhile, the regulator itself is waiting for the maturity of the industry marked by improved oversight on market surveillance, definitive asset classification, and airtight custody solutions, before embracing the industry wholeheartedly. But it still remains to be known at what cost?

The good news so far is that earlier this year, a bill was introduced in the House to help with asset classification, that partly takes care of one problem. Nasdaq introduced its SMARTS Market Surveillance solution which may have provided precedence in the direction of play towards controlling market manipulation. On the subject of custody solutions, crypto ventures are urged to ensure best cybersecurity practices. Fidelity, Coinbase, Gemini, BitGo, Ledger, ItBi and even Goldman Sachs are among many reportedly racing toward that end.

Peirce’s overall sentiment in a manner of speaking, perhaps one shared on both sides of the tussle is that the delay in drawing clear lines may actually allow more freedom for the technology to come into its own.

 

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JPMorgan Strategist Predicts Impending Heightened Crypto Interest from Wall Street

JPMorgan Strategist Predicts Impending Heightened Crypto Interest from Wall Street

With much talk in 2018 regarding Wall Street’s potential cryptocurrency uptake somewhat fading towards the end of the year, JPMorgan’s Global Market Strategist Nikolaos Panigirtzoglou is reigniting the flame.

The market needs to grow first, claims Panigirtzoglou, predicting the long-awaited and much talked about rush of institutional investment, but it is not going to be an overnight sensation. He argues: “The stability that we are seeing right now in the cryptocurrency market is setting the stage for more participation by institutional investors in the future.”

Partly, the slow uptake, according to the JPMorgan strategist, is regulators who are still a “bit slow to realize” the potential of the industry. A recent Circle report agrees, pointing out how ICO activity reduced in the second half of 2018 due to increased regulation, putting further downward pressure on the cryptocurrency market.

report points out that stablecoins, security tokens, and institutional crypto, by providing the solution of real-world problems and adding more certainty to the crypto space as a whole, are the next big thing. Last year, Cardano (ADA) co-founder Charles Hoskinson predicted that the entry of Wall Street into the sector would bring in “tens of trillions of dollars”.

Late last year, Wall Street’s previous crypto fervor cooled noticeably, with Goldman Sachs, Morgan Stanley, and Citigroup all shelving much publicized crypto-related products for a future date. Twitter CEO Jack Dorsey is biding his time and certainly holding on to his Bitcoin claiming it is “native to internet ideals”, and as such must be successful. Always resolute in his claims, Dorsey insists that:

“The world ultimately will have a single currency, the Internet will have a single currency. I personally believe that it will be Bitcoin.”

That being the case, Wall Street won’t be too far away when it happens.

 

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Mixed Bitcoin Messages From Davos World Economic Forum

Bitcoin was the talk of the town in Switzerland last year when the world’s movers and shakers assembled at Davos for the 2018 World Economic Forum, but this year the cryptocurrency demands a far less prominent position at the table.

The comparison is startlingly obvious. From getting a fair degree of attention a year ago at the 2018 Conference, albeit on the way down even then, the cryptocurrencies are less liable to attract the attention of delegates this year, particularly given the current trials of leaders from the US, UK, and France all entangled in their own domestic issues, some of them shared.

Angel Versetti, CEO of blockchain-based company Ambrosus observed: “While last year, people were talking about crypto and blockchain anywhere and everywhere, this year there is comparatively little discussion around it.”

Hardly surprising given Trump’s domestic battle and government shutdown, May’s Brexit squabbles and Macrons’ sea of yellow vests. The subject still comes up though, some fairly hopeful of a market revival, some less, like the advisor to the Bank of England, Huw van Steenis who said that cryptocurrencies weren’t on the list of priorities at this year’s summit, “I’m not so worried about cryptocurrencies,” he commented not unexpectedly, “They fail the basic tests of financial services, they’re not a great unit of exchange, they don’t hold value and they’re slower.”

Not the case at all, according to Jeremy Allaire — CEO of Circle, the Goldman Sachs-backed payments and tech company as he argues that fintech will be dependent on decentralized technology moving forward:

“Crypto is fundamental to the future, and so crypto computing, which is what these blockchain platforms really are, they’re open computing platforms — we need tamper-proof, resilient, decentralized infrastructure if we want society to survive the digital age.”

Allaire went on to argue that Circle was also a huge supporter of central-bank digital currencies, suggesting that the private sector will be the leader in setting the pace for the creation of these centralized crypto assets. However, Jeff Schumacher, founder of BCG Digital Ventures was less optimistic during a CNBC panel discussion as he mentioned, “I do believe it [cryptocurrency] will go to zero,” adding, “I think it’s a great technology, but I don’t believe it’s a currency. It’s not based on anything.”

Next year could be an embarrassment for some of these commentators if Bitcoin hits its expected heights this year as Wall Street comes on board.

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BitGo Enters Cold Storage Crypto Trading

BitGo Enters Cold Storage Crypto Trading

A company which already has enticed both Galaxy Digital Ventures and Goldman Sachs in the past has developed a platform enabling clients to trade cryptocurrency straight from cold storage.

Palo Alto-based crypto storage firm BitGo has announced the new service just days after the hacking of cryptocurrency exchange Cryptopia which saw more than ETH 19,391 (USD 2.4 million) and Centrality tokens worth USD 1.18 million transferred to unknown wallets.

Bitgo has chosen Genesis Global Trading for the service which ensures that customer buy and sell orders will never leave cold storage as SEC and FINRA regulated Genesis hold a cold storage wallet with BitGo. Mike Novogratz, Bitcoin pundit and CEO of Galaxy Digital Holdings Ltd, claims these types of storage solutions could easily promote the next bull run, commenting:

“I think the next move up is going to need custody from a trusting source… It’s going to need a little more regulatory clarity… We wouldn’t take out USD 10,000 without those two things because that’s what brings the institutional investors in. But we’re going to get there.”

BitGo has announced that Bitcoin, Bitcoin Cash, Ethereum, Ethereum Classic, Litecoin, Ripple, and ZCash will all be available under the new system

 

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Wall Street, Institutional Investors Prime for Next Crypto Bull Run

Wall Street, Institutional Investors Prime for Next Crypto Bull Run

Analysts are looking ahead to the potential for a sustained bull run on cryptocurrency markets in 2019, and many are expressing an expectation this will be the signal for Wall Street and institutions to up investment.

Many see large-scale investment being re-examined in 2019 after being scared off by Bitcoin’s December dip. Wall Street notably stood back prior to the end of the year with Goldman Sachs’ much-publicized plans to open a crypto trading desk called “top-of-the-market-hype thinking” by one New York executive.

Travis Scher of New York’s venture capital firm Digital Currency Group sees a change in indirection from Wall Street and large investment as imminent suggesting that Wall St has lagged behind. He has been watching the industry, choosing to remain on the fringes waiting for signs of an upturn before making a move.

Canadian entrepreneur and activist Jeff Berwick (aka Dollar Vigilante) sees 2019 as the year that cryptocurrency prices will take off once institutions finally make their move. He suggests that trillions of dollars are waiting to be invested in the cryptocurrency market.

Despite Bakkt’s delay, the recent seed funding of over USD 182 million goes on to show that a lot of institution key players are supportive of a successful launch of the platform, after particularly after the New York-based platform acquired “certain assets” and employees of Rosenthal Collins Group (RCG) to expand the company.

With Nasdaq also waiting in the wings and the potential for non-fungible tokens (NFTs) and ETFs predicted to push blockchain adoption and kickstart a crypto bull run, 2019 already offers high expectations for both analysts and investors.

 

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Wall Street Observes Bullish Trend in OTC Crypto Trading

Wall St Observes Bullish Trend in OTC Crypto Trading in New Year Copy

With Wall Street pretty much sitting on the fence last year and major players pulling back from the brink when it comes to cryptocurrency, reports from New York’s banking hub seem to indicate that the crypto trade is gaining fresh impetus.

Many see large-scale investment being re-examined in 2019 after being scared off by Bitcoin’s December dip. Wall Street notably stood back prior to the end of the year with Goldman Sachs’ much-publicized plans to open a crypto trading desk called “top-of-the-market-hype thinking” by one New York executive.

Nasdaq is already supporting crypto exchanges and the company is certainly not new to cryptocurrency’s underlying technology, blockchain. Apart from its long-term relationship with blockchain startup, Chain, it has recently announced a collaboration with cryptocurrency exchange Gemini.

It appears that selling on over the counter (OTC) desks is now turning to buying, as crypto OTC firm Cumberland pointed out, with the crypto buyers and sellers dynamic shifting towards far more bullish territory this year to date.

Desk Update: Historically, our OTC trading is relatively balanced between buyers and sellers. Over the last week, our OTC buy/sell ratio (by notional value) has increased approximately 60% towards counterparties buying.

— Cumberland (@CumberlandSays) January 8, 2019

Michael Moro, the CEO of Genesis Trading, sees the same reaction by buyers to the new year following last year’s rush to sell off crypto assets for tax purposes agreeing:

“I’ll echo Cumberland’s sentiments. Year-end saw quite a bit of selling for numerous reasons (e.g., tax loss selling and liquidation of crypto donations). As the year turned, the selling pressure from such activities has subsided, and we have seen more buy-side interest pick up.”

Monica Summerville, Tabb Group’s director of fintech, claims that major crypto exchanges have less trade that the OTC market which she says is over three times more active, arguing that “the big deals go to OTC”.

 

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Bitcoin 10 Years On: Its Place in Finance

Bitcoin 10 Years On: Its Place in Finance

Satoshi Nakamoto’s original vision for the use of Bitcoin has certainly evolved over the last decade, with mainstream adoption and the widely-believed “inevitable” entry of institutional investors giving it a place at the table with the likes of Goldman Sachs and Bank of America.

Once dismissed as some libertarian fantasy, Bitcoin has certainly come a long way in the last ten years, but will it truly ever manage to find a sustainable place in the mainstream financial sector?

The original use case

As Nakamoto imagined it in the white paper, Bitcoin would be ”a purely peer-to-peer version of electronic cash [that] would allow online payments to be sent directly from one party to another without going through a financial institution”, citing the weaknesses of the trust-based model of which third-party mediators are required. Because of the double spending problem that arises from this model, Nakamoto recognized that merchants and banks would be required to ”hassle [clients] for more information than they would otherwise need”.

Bitcoin was created as a new electronic payment system that provided an alternative solution to the double spending problem by publishing all transactions on the blockchain publicly with a timestamp that means the first transaction that took place can always be checked. This is a way for customers to retain their personal data while giving people financial freedom to transact if they did not, for example, have the required identification to open a bank account or simply did not want to share that information. It also removes their requirement of dealing with central banks, of whom Nakamoto had expressed concerns over the way they managed peoples’ capital.

The idea of Bitcoin was revolutionary (a description its creators never used yet one hundreds of cryptocurrencies claimed), rebellious and, given that it meant anonymity of transactions, not something that central banks or governments looked upon favorably in the early days.

However, money talks, and after the Bitcoin bull run of 2017, the financial sector was forced to legitimize it at the very least as a potentially profitable investment option.

The move into the mainstream

CNBC, Forbes and Bloomberg have all featured positive reports on Bitcoin as an investment tool in 2018, with Henrik Andersson, chief investment officer of Apollo Capital Fund claiming, ”the coming year we will see a gradual adoption from institutions.” Andersson sees the growing number of US university endowments investing in funds as one major indicator of his claim. Goldman Sachs’ awaited cryptocurrency trading desk should also launch this year, while Nasdaq already supports cryptocurrency exchanges.

All of these factors indicate a real move of Bitcoin into mainstream finance, and into the highly-regulated world of identity checks and third-party mediators that it was created to avoid.

2018 closed with the banking sector in a bear market and the worst annual performance of the stock market in the last decade, with reports attributing this to the slowdown of the Chinese economy and concerns in the European market over the economic impact of the UK leaving the European Union.

While the cryptocurrency market did not perform well itself and Bitcoin indeed finished the year with its worst annual performance to date, there are still many questions over what impact the mainstream financial sector has, and will have in the future, on the performance of cryptocurrency.

As more institutional investors enter the market and an increasing number of established banks offer digital asset investment options, will more money be moved into cryptocurrency when stocks fall and traditional investment choices become less attractive? Or will Bitcoin’s move into the mainstream mean it is negatively impacted by poor performance in mainstream finance?

It is still early days to know for sure, but one study conducted by Yale University in August 2018 claims that the price of Bitcoin is not affected by macroeconomic factors or familiar stock market factors. Rather, they say, the drivers of cryptocurrency prices are unique to the market itself, with they two key predictors being market sentiment, investor attention and a ‘momentum effect’ that see patterns in price fluctuations.

Although, if predictions are correct in estimating an influx of institutional investors in 2019, how their influence will play out in Bitcoin’s market performance may change the conclusions of the Yale study.

Can Bitcoin succeed if it is primarily viewed as a tool for investment?

Bitcoin benefits from its resource scarcity as commodities such as oil and gold do, but nowhere in its white paper does it promise “high returns, no risk” as you can find in many initial coin offering white papers in circulation.

Major centralized cryptocurrency exchanges such as Coinbase that require identity authentification surely go against what Nakamoto originally envisioned for Bitcoin. With global regulators focused cracking down on the industry, can Bitcoin survive without exchanges complying with know-your-customer regulations?

2019 should be a year to set the pace for understanding where Bitcoin will find itself in the foreseeable future of finance.

 

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