(Kitco News) – As the institutional adoption of digital assets grows, Goldman Sachs has announced plans to spin out its cryptocurrency platform to launch a new company focused on creating and trading financial instruments on blockchain networks.
According to Mathew McDermott, Goldman’s global head of Digital Assets, the bank is currently in discussions with several market participants regarding the matter as it works to build out the platform’s capabilities and develop new commercial use cases.
“It’s in the best interest of the market to have something that is industry-owned,” McDermott said in an interview with Bloomberg. He noted that while the plans for the new company are still in the early stages, the long-term goal is to have the spin-out launched within the next 12 to 18 months, subject to regulatory approval.
A statement from electronic trading platform Tradeweb Markets said the company is set up to become Goldman’s first strategic partner on the spin-out and plans to work with the bank to help bring new commercial use cases to the digital assets platform.
Goldman is also looking to facilitate secondary transactions in private digital asset companies for its clients, McDermott said, adding that it will help family offices and other clients find reliable sources of liquidity while also allowing buyers to take advantage of private market discounts.
And looking to capitalize on a market that was thrown into disarray with the high-profile collapses of 2022, McDermott said Goldman is also looking to resume its Bitcoin-backed lending activities.
In 2022, the bank launched its Digital Asset Platform as a way to issue traditional assets using blockchain technology and has seen some uptake in the years since, including its use to issue bonds for the European Investment Bank. The ultimate goal of the platform is to be owned by a new entity, McDermott said, while Goldman will retain its digital assets team and continue to expand its broader activities in the space.
While Wall Street has dabbled in blockchain for nearly a decade, few products have achieved notable levels of adoption, largely due to a reluctance by companies to get involved with projects developed by their competitors.
“If you are trying to build out a scalable marketplace, you want to have the right strategic participants embracing this technology,” McDermott said. “You want a number that is nimble enough to operate, driven by the commercial use cases.”
Goldman Sachs has been one of the most active institutions in digital assets. In July, McDermott announced the bank was preparing to launch three new tokenization products later this year in the U.S. and Europe following “a major uptick in interest from clients” in crypto.
At the time, McDermott said Goldman plans to create marketplaces for tokenized real-world assets (RWAs) and would focus on the “fund complex” in the U.S. and European debt markets that could help to improve transaction speeds and the types of assets that can be used as collateral.
He added that tokenization remains a central part of the bank's plans moving forward as it looks to keep pace with BlackRock, who launched the BlackRock USD Institutional Digital Liquidity Fund (BUIDL) fund earlier in the year, which has already surpassed $540 million in assets under management. Combined, the tokenized US treasury debt market boats approximately $2.4 billion in total value locked as of Nov. 14, according to RWA.xyz.
McDermott noted that Goldman primarily targets financial institutions, rather than retail investors, with its new products and will rely exclusively on permissioned blockchains. He said Goldman’s goal with the spinoff is to create an industry-owned digital asset platform that will expand the use of its in-house developed platform, including adding fund tokenization and enabling collateral to be used via blockchain.
