Regulations

Goldman Sachs Still Not Holding Crypto on Behalf of its Clients

Goldman Sachs Still Not Holding Crypto on Behalf of its Clients

Goldman Sachs is still unable to hold bitcoin on behalf of its clients, despite announcing three months ago that they would begin offering services to their clients due to pressure from demand.

Back in August, ToshiTimes announced Goldman Sachs’ plans to begin offering cryptocurrency custody services to its clients, citing significant “client interest”. However, to date the firm is still yet to offer the services to its clients.

“One of the things [people] ask me is ‘Can you hold our coins?’ and I say ‘No, we cannot,” said Justin Schmidt, the head of digital asset markets at Goldman, at a New York conference.

“One of the things we have to take into consideration when we’re building out our business is what we can and cannot do from a regulatory perspective.”

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Bitcoin Futures Contracts on the Menu for a While

Despite the inability to hold customers’ physical bitcoin, the firm has been clearing bitcoin futures contracts since June. And this seems to be part of the problem. At current, no US provider of futures contracts holds a bitcoin custodian license.

“We are clearing some futures around Bitcoin, talking about doing some other activities there, but it’s going very cautiously,” said COO David Solomon to Bloomberg back in June. The practice has become more common since then. However, futures contracts do not involve the purchase of physical bitcoin but rather rely on market sentiment.

“We’re listening to our clients and trying to help our clients as they’re exploring those things too. Goldman Sachs must evolve its business and adapt to the environment,” he continued.

Creative Solutions for Custody from Coinbase and BitGo

It should be noted however that the January-scheduled launch of Bakkt, the NYSE-backed bitcoin futures trading platform will change things, as it pledges to deliver physical bitcoin to its investors.

But for now, firms are having to fudge things somewhat and use – or even create – third-party providers to get around complicated legal issues.

Goldman Sachs invested into crypto-custodian BitGo with Mike Novogratz last month. BitGo themselves created a new daughter-company, BitGo Trust to be its regulated custodian. Coinbase also has a similar custodian arm in the form of Coinbase Custody.

Custody Absolutely Necessary for Future

Justin Schmidt does concede that custody is an important part of being able to offer full crypto services to its clients.

“Custody is this foundational piece that is absolutely necessary. [It] is part of an overall integrated system where different parts need to work well with each other and safely with each other and you have to be able to trust all the different parts in that chain, from buying something to transferring it to storing it in for the long-term,” he stated.

Schmidt also concedes that pressure from clients is growing all the time. It is doubtless only a matter of time before crypto custody provision is established, however further regulatory clarity will be required before that can happen.

Image Source: “Flickr”

Ledger Nano S - The secure hardware wallet