Exclusive: Goldman Sachs on hunt for bargain crypto firms 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 exchange collapsed and investor interest waned.

Matthew McDermott, Goldman’s head of digital assets, told Reuters the implementation of FTX has increased the need for more trusted, regulated cryptocurrency players, and big banks see an opportunity to pick up the business.

Goldman is doing due diligence on a number of different crypto companies, he added, without giving details.

“We’re seeing some really interesting opportunities, which are very price sensitive,” McDermott said in an interview last month.

FTX filed for Chapter 11 bankruptcy protection in the United States on November 11 after the dramatic collapse, raising fears of contagion and widening calls for more crypto regulation.

“It’s definitely reset the market in terms of sentiment, there’s no doubt about that,” McDermott said. “FTX has been the poster child in many parts of the ecosystem. But to reiterate, the underlying technology continues to perform.”

While Goldman’s potential investment isn’t huge for the Wall Street giant, which earned $21.6 billion last year, its willingness to hold on to investments amid the sector’s shock shows it sees a long-term opportunity.

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Its CEO David Solomon told CNBC on November 10, as the FTX drama unfolded, that while he views cryptocurrencies as “highly speculative,” he sees the infrastructure as more formalized. Sees a lot of potential in technology.

Competitors are more skeptical.

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

HSBC ( HSBA.L ) chief executive Noel Quinn, meanwhile, told 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 offer services such as compliance, cryptocurrency data and blockchain management.

McDermott, who competes in triathlons in his spare time, joined Goldman in 2005 and ran the digital asset business after serving as director of cross-asset financing.

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His team has grown to over 70 people, including a seven-strong crypto options and derivatives trading desk.

Goldman Sachs has partnered with MSCI and Coin Metrics to launch data service Datomi, which aims to classify digital assets based on how they are used.

McDermott said the company is also developing its own personal distributed ledger technology.

‘Confidential’ players

The global cryptocurrency market is set to reach $2.9 trillion by the end of 2021, according to data site CoinMarketCap, but has lost about $2 trillion this year as central banks tighten credit and hit a series of high-profile corporate failures. It was last at $865 billion on December 5.

The fallout from FTX’s collapse boosted Goldman’s trading volume, McDermott said, as investors sought trades with regulated and well-capitalized rivals.

“What has increased is the number of financial institutions that want to do business with us,” he said. “I suspect that some of them trade with FTX, but I can’t say that with cast iron certainty.”

Goldman is also looking at hiring opportunities as crypto and tech companies shed employees, McDermott said, though the bank is happy with the size of its team for now.

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Others are also seeing the crypto meltdown as an opportunity to build their businesses.

Britannia Financial Group is developing its own cryptocurrency-related services, its chief executive Mark Bruce told Reuters.

Bruce said the London-based company aims to serve clients who are interested in diversifying into digital currencies, but who have never done so before. It will also satisfy investors who are very familiar with the asset, but have become concerned about storing funds in crypto exchanges since the collapse of FTX.

Britain is seeking more licenses to provide crypto services, such as making transactions for wealthy individuals, he said

“We’ve seen a lot of customer interest since the demise of FTX,” he said. “Consumers have lost faith in some of the younger businesses in the sector that do purely crypto, and are looking for more credible competitors.”

Reporting by Iain Withers and Laurence White, Editing by Lannan Guyne and Alexander Smith

Our Standards: The Thomson Reuters Trust Principles.


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