Goldman Sachs Plans Bitcoin Trading: 'It is NOT a Fraud'

Roman Schwartz
May 4, 2018

The bank, preparing to pioneer a new cryptocurrency market on Wall Street, plans to start small and offer a limited number of derivatives, according to a person briefed on the decisions.

In the future, Goldman Sachs hopes to receive regulatory approval from state-level authorities, including the Federal Reserve, to start trading actual Bitcoins, not just products linked to them.

Rana Yared, a Goldman executive, mentioned in an interview that they aren't necessarily die-hard believers of Bitcoin, but they do have the interest of their clients in mind. "For nearly every person involved, there has been personal skepticism brought to the table", says Rana Yared, Executive Goldman responsible for overseeing the creation of trading operation. The management of the bank considers bitcoin as an alternative asset.

But until now, regulated financial institutions have steered clear of Bitcoin, with some going so far as to shut down the accounts of customers who traded Bitcoin.

Jamie Dimon, the chief executive of JPMorgan Chase, famously termed bitcoin a "fraud", and argued about its features, which "were nothing more than a speculative bubble".

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This decision by Goldman Sachs could be a trend-setter in the financial world where bitcoin - a virtual currency - is still being avoided by banks and seen with suspicion. The company understands that Bitcoin is not a fraud, as some other companies will have people believe, and that some people still want to invest in it as a valuable commodity, similar to gold and other precious metals.

Another issue the bank has to deal with if it wants to trade actual bitcoin is how to hold the virtual currency while protecting it from being stolen by hackers. Reports indicate that one of the biggest financial institutions in America is now gearing up to divert some of its capital for sponsoring various investment contracts related to the bitcoin price that will eventually lead to direct bitcoin trading.

The step comes with a lot of uncertainties and bitcoin prices are primarily set on unregulated exchanges in some other countries where fewer measures are set to prevent market manipulation.

In connection with the risk associated with engaging in virtual currencies, she explained that it is the increased risk that needs special attention but they do comprehend the new risk involved as reported by the publication. CEO Lloyd Blankfein had already stated that the bank was clearing BTCn futures for its clients whilst any further action on the proposal would depend on clearance by USA regulators.

The investment bank has hired its first "digital asset" trader, Justin Schmidt, to handle the daily operation. Schmidt, who will be handling the bank's daily operation, has previous experience at hedge fund Seven Eight Capital before he entered the cryptocurrency trading market past year.

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