The Ledger: Goldman Bitcoin Fake-Out, Musk on Ethereum, Tezos Games


As I was preparing for a reporting trip in Mexico on Wednesday, the crypto asset markets tanked. The supposed reason: a Business Insider story claiming that Goldman Sachs planned to abandon its rumored pursuit of a cryptocurrency trading desk. Apparently, the pullback from one of Wall Street’s biggest, boldest-faced names spooked investors, provoking a selloff for Bitcoin and it’s brethren. Over the course of the day, the price of Bitcoin dropped about $1,000 to roughly $6,400 (and it has continued slipping).

Yet just a day later Goldman’s chief financial officer, Marty Chavez, described the news report to an audience at TechCrunch Disrupt, that annual startup Mecca, as “fake news.” He said the bank planned to expand beyond simply clearing futures contracts, a service it already provides, to offer so-called non deliverable forwards. In other words, the bank intends to settle crypto-trading contracts, but in dollars rather than in the asset itself. The next frontier—swapping physical Bitcoin, which requires secure storage of top-secret cryptographic keys—is “tremendously interesting and tremendously challenging,” he noted.

Curiously, Chavez’s remarks did little to restore faith in the markets. The price of Bitcoin was hovering near $6,200 at the time of this newsletter’s composition. Crypto enthusiasts remained rattled.

I was puzzled by the pessimism, admittedly. Even the original, panic-inducing story, which Goldman debunked, said that the bank was interested in pursuing a custodial solution, a product for securely holding onto crypto assets. I regarded this as a positive signal; the nascent crypto industry needs more options to safely store this stuff. That is not to say Coinbase, Gemini, BitGo and other financial newcomers who offer stewardship services do not do so adequately. But having blue chip banks like Goldman and JPMorgan Chase stamp their imprimatur on Bitcoin coffers of their very own will go a long way toward satisfying regulator concerns about the market, no doubt.

“From the perspective of custody, we don’t yet see an institutional grade custody cases custodian solution for Bitcoin,” Chavez cautioned on the TechCrunch stage this week. If Goldman is indeed exploring a custodial service, then his words are obviously self-serving. But that does not make him wrong.

The Securities and Exchange Commission continues to reject applications for Bitcoin exchange-traded funds, or ETFs. (If you’re interested in learning more about this, I discussed the agency’s hangups on a recent episode of The Breakdown, a show Fortune produces with its sister publications.) Applicants have so far mostly proposed to offer these funds by dealing in Bitcoin futures contracts, rather than in physical Bitcoin. But part of Bitcoin’s allure and value proposition is its instant portability and settlement. Why treat Bitcoin like oil barrels? I suspect Bitcoin ETF applications will have a better shot at approval once more custodial options are on the table, allowing funds to handle the physical asset itself.

Before taking bets, we need proper vaults.

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