One of the giants in traditional banking, Goldman Sachs, renewed its push to digitalize Wall Street’s future, as the bank is “exploring the commercial viability of creating a fiat digital token,” according to the new Global Head of Digital Assets, Matthew McDermott. The news puts Goldman Sachs among the banks, researching the possibility to issue their own crypto stablecoin, along with JPMorgan, Japanese Mitsubishi UFJ Financial Group and the national banks of China, South Korea, and Canada.
McDermott, who was formerly a managing director in charge of Goldman Sach’s internal funding operations, replaces the crypto trader and quant Justin Schmidt, who operated the bank’s digital assets department since 2018.
“In the next five to 10 years, you could see a financial system where all assets and liabilities are native to a blockchain, with all transactions natively happening on the chain,” McDermott stated during an interview.
Most probably Goldman Sachs would utilize a blockchain or a DLT solution, like the Ethereum-based Quorum blockchain, currently developed by JPMorgan. McDermott has another strong advantage in his advocation for a new “financial system where all assets and liabilities are native to a blockchain”. This advantage is named Oli Harris. Harris is a former JPMorgan employee who previously worked on the development of the Quorum platforms. Currently, Harris is a part of McDermott’s digital assets team.
However, Goldman Sachs’ native stablecoin is still “in its early days”, according to McDermott. The bank’s head of digital assets also noted that the path Goldman Sachs would choose may stray away from the blockchain ecosystem.
Apart from the fiat-backed stablecoin, Goldman Sachs had its share of blockchain research prior to the possible asset development. The bank has been considering to offer trading and custodial services for cryptocurrencies since 2018, but CEO David Solomon noted that no clear plan had been created for implementing such concepts. However, in 2019 Goldman Sachs’ CEO announced that the bank is focusing on researching “tokenization" mechanisms of financial assets.
“We are watching the cryptocurrency market as it develops,” Solomon added.
Meanwhile, the banking giants worldwide are actively developing blockchain-based stablecoins. Signature bank became a pioneer, releasing its Signet stablecoin in 2018, while in June 2019 JPMorgan launched the JPM Coin. Goldman Sachs, however, distanced themselves until now, calling the crypto market "a bubble, similar to the dot-com era".
However, the nature of bank stablecoins is aimed at institutional investors and it’s still unclear if some of the stablecoins would be available to the public. Also, the majority of crypto investors keep their skeptical stance on bank-issued stablecoins, as the assets would be centralized, meaning that banks would still have control over transactions. Bitcoin and other crypto assets key distinctive feature is to prevent centralized control over transactions, which may not be the case with bank-issued stablecoins.