American investment firm Goldman Sachs Group Inc. is planning to clear bitcoin futures for particular clients as two new derivatives come online in the coming days.
A source familiar with the matter said that the world’s second-largest investment bank is still considering whether to participate in other aspects of cryptocurrencies, such as market making.
Goldman will operate in an agency capacity and will not be creating inventory in the derivatives. It will be choosing client trades on a case-by-case basis.
Goldman’s spokeswoman Tiffany Galvin stated that given that it is new product, as expected they are assessing the specifications as well as the risk attributes for the bitcoin futures contracts as part of their standard procedure.
The two future exchanges are expected to come online on December 10 and 18. The New York-based investment group plans to invest in the cryptocurrency upon Sunday’s launch as the two markets are expected to significantly boost liquidity of bitcoin.
Goldman, along with its clients is likely to use these bitcoin futures trading platforms to invest in bitcoin by mid-December.
However, the products are going live even though concerns over the risks of trading cryptocurrency derivatives have not been completely worked out.
A trade association stated this week that the contracts were rushed without enough reflection on the risks it might pose.
Major Banks Delay Access to Bitcoin
Some of the major banks including, Bank of America Corp. (BofA), Citigroup Inc., and Merrill Lynch Wealth Management have already decided not to offer their customers access to the first bitcoin futures when they start trading.
Morgan Stanley and Société Générale S.A. are also still weighing up their approach to bitcoin futures.
Banks play a vital role in enabling future trades for hedge funds and other large trading companies. If they do not grant access to the new market, some of their customers might not be able to place bets on bitcoin futures.
Goldman’s chief executive Lloyd Blankfein said that if the digital currency works, they will get to it. He stated last month that he is open-minded towards bitcoin, as he saw many assets and technologies performing well.
Moreover, Blankfein noted that if the cryptocurrency is a natural evolution from hard money to digital money, then it has the potential to become the next gold and reserve currency of the world.
With Goldman optimistic about the growth of bitcoin as the new gold as well as with its strong store of value, other major banks and financial institutions are likely to follow.
The banks may indeed change their minds and start offering the service. Still, their uncertainty could deter on the much awaited launch of bitcoin futures, which supporters see as a big step towards the expansion of the digital currency.
Banks as future brokers serve as a shield to counterparties, which puts them in a tight spot should their clients suffer losses they cannot pay.
In deciding whether to support bitcoin futures, brokers need to assess their relationship with clients and figure out if they have to charge larger amounts to backstop bitcoin futures trades, which is not entirely an easy task given the cryptocurrency’s volatility.
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