Exclusive: Goldman Sachs looks for crypto firms to deal with after FTX fiasco

LONDON, Dec 6 (Reuters) – Goldman Sachs ( GS.N ) plans to spend tens of millions of dollars buying or investing in crypto companies after the FTX stock market crash hit valuations and dampened investor interest.

FTX’s explosion has fueled the need for more reliable, regulated cryptocurrency players, and big banks see an opportunity to do business, Goldman’s head of digital assets Mathew McDermott told Reuters.

Goldman is conducting due diligence on a number of different crypto companies without providing details.

“We’re seeing some really interesting opportunities that are more reasonably priced,” McDermott said in an interview last month.

FTX filed for Chapter 11 bankruptcy protection in the U.S. on Nov. 11 after the dramatic bankruptcy, which sparked fears of contagion and fueled calls for more cryptocurrency regulation.

“It’s definitely brought the market back in terms of sentiment, there’s no question about that,” McDermott said. “FTX was the poster child in many parts of the ecosystem. But to reiterate, the core technology continues to work.”

For a Wall Street giant that earned $21.6 billion last year, Goldman’s potential investment isn’t huge, but its willingness to invest amid the sector’s turmoil suggests it senses a long-term opportunity.

Its CEO David Solomon told CNBC on Nov. 10 that while the FTX drama unfolded, he sees cryptocurrencies as “highly speculative” but sees great potential in the underlying technology as the infrastructure becomes more formalized.

Competitors are more skeptical.

“I don’t think it’s a fad or going away, but I can’t put an intrinsic value on it,” Morgan Stanley ( MS.N ) CEO James Gorman told Reuters’ NEXT conference on Dec. 1.

HSBC ( HSBA.L ) CEO Noel Quinn said at a banking conference in London last week that he had no plans to expand into crypto trading or investing for retail clients.

Goldman has invested in 11 digital asset companies that provide services such as compliance, cryptocurrency data and blockchain management.

McDermott, who competes in triathlons in his spare time, joined Goldman in 2005 and rose to lead the digital assets business after serving as head of cross-asset financing.

His team has grown to over 70 people, including seven powerful cryptocurrency options and derivatives trading desks.

Goldman Sachs also launched datonomy, a data service with MSCI and Coin Metrics, aimed at classifying digital assets by how they are used.

The firm is also building its own private distributed ledger technology, McDermott said.


According to data site CoinMarketCap, the global cryptocurrency market reached $2.9 trillion at the end of 2021, but lost nearly $2 trillion this year as central banks tightened credit and a series of high-profile corporate failures hit. The last time was 865 billion dollars on December 5.

Ripple effects from the FTX collapse boosted Goldman’s trading volume, McDermott said, as investors sought to trade with regulated and well-capitalized counterparts.

“What is increasing is the number of financial institutions that want to do business with us. “I suspect many of them trade with FTX, but I can’t say with absolute certainty.”

While McDermott is pleased with the size of the bank’s team for now, he also sees hiring opportunities as Goldman cuts staff from crypto and tech companies.

Others see the cryptocurrency crash as an opportunity to build their businesses.

Britannia Financial Group is building its cryptocurrency services, its chief executive Mark Bruce told Reuters.

The London-based company aims to serve customers who want to branch out into digital currencies but haven’t done so before, Bruce said. It will also cater to investors who are very familiar with assets but are nervous about holding funds in cryptocurrency exchanges after the FTX collapse.

Britannia said it is applying for more licenses to provide cryptocurrency services, such as brokering deals for wealthy individuals.

“We’ve seen more customer interest since the collapse of FTX,” he said. “Customers have lost faith in some of the younger crypto-only businesses in the sector and are looking for more reliable partners.”

Reporting by Iain Withers and Lawrence White Editing by Lananh Nguyen and Alexander Smith

Our standards: Thomson Reuters Trust Principles.

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