Exclusive: Goldman Sachs on hunt for bargain crypto firms after FTX fiasco

LONDON, Dec 6 (Reuters) – Goldman Sachs (GS.N) plans to spend hundreds of millions of dollars to buy or invest in crypto companies after the collapse of the FTX exchange hit valuations and waned investor interest.

Matthew McDermott, Goldman’s head of digital assets, told Reuters the FTX explosion has increased the need for more trusted, regulated crypto players, and an opportunity for big banks to take on the business.

Goldman is conducting due diligence on several different crypto firms, he added, without providing details.

“We see some really interesting opportunities that are priced very sensibly,” McDermott said in an interview last month.

FTX filed for Chapter 11 bankruptcy protection in the United States following its dramatic collapse on November 11, raising fears of contagion and calls for more crypto regulation.

“It’s definitely trailing the market in terms of sentiment, there’s no doubt about it,” McDermott said. “FTX was a poster child in many parts of the ecosystem. But to reiterate, the underlying technology continues to perform.”

While the amount Goldman could potentially invest isn’t large for the Wall Street giant, which earned $21.6 billion last year, its willingness to continue investing amid the sector shakeout suggests it senses a long-term opportunity. does.

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Its CEO David Solomon told CNBC on Nov. 10 that, as the FTX drama was unfolding, while he views the cryptocurrency as “highly speculative,” he sees a lot of potential in the underlying technology as its infrastructure becomes more formal. goes.

Opponents are more skeptical.

“I don’t think it’s a fad or going away, but I can’t put an intrinsic value on it,” Morgan Stanley (MS.N) CEO James Gorman told a Reuters Next conference call on Dec. 1.

Meanwhile, HSBC (HSBAL.L) CEO Noel Quinn told a banking conference in London last week that he has no plans to expand into crypto trading or investing for retail customers.

Goldman has invested in 11 digital asset companies that provide services such as compliance, crypto data, and blockchain management.

McDermott, who competes in triathlons in his spare time, joined Goldman in 2005 and rose to run its digital assets business after serving as head of cross asset financing.

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Their team has grown to over 70 people, including a seven-strong crypto options and derivatives trading desk.

Goldman Sachs teamed up with MSCI and Coin Metrics to launch Datanomy, a data service that aims to classify digital assets based on their usage.

McDermott said the firm is also building its own private distributed ledger technology.

‘Dependable’ player

The global cryptocurrency market is set to hit $2.9 trillion at the end of 2021, according to data site Coinmarketcap, but nearly $2 trillion is set to be lost this year as central banks tighten credit and a string of high-profile corporate failures Hit. It was last at $865 billion on December 5.

The ripple effect from FTX’s collapse has boosted Goldman’s trading volumes, McDermott said, as investors sought to trade with regulated and well-capitalized counterparties.

“There has been an increase in the number of financial institutions wanting to do business with us,” he said. “I suspect many of them did business with FTX, but I can’t say with cast iron certainty.”

Goldman also sees recruiting opportunities as crypto and tech companies shed staff, McDermott said, though the bank is happy with the size of its team right now.

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Others also see the crypto meltdown as an opportunity to build their businesses.

Britannia Financial Group is building its own cryptocurrency-related services, its chief executive officer Mark Bruce told Reuters.

Bruce said the London-based company aims to serve customers who are interested in diversifying into digital currencies, but who have never done so before. It will also cater to investors who are very familiar with the asset but have been nervous about depositing funds into crypto exchanges since the collapse of FTX.

He added that Britannia is applying for more licenses to provide crypto services, such as dealing for wealthy individuals.

“We have seen more interest from customers since the closure of FTX,” he said. “Clients have lost faith in some of the young businesses in the sector that deal purely in crypto, and are looking for more reliable counterparts.”

Reporting by Ian Withers and Lawrence White, Editing by Lannan Nguyen and Alexander Smith

Our Standards: The Thomson Reuters Trust Principles.

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