It was fake news – Goldman Sachs is going all-in on bitcoin derivatives, crypto rises

Fake news says Goldman Sachs. Yesterday US investment bank Goldman Sachs‘s chief financial officer Martin Chavez shot down the Business Insider report claiming the bank had dropped the crypto trading desk initiative.

Fake news says Goldman Sachs

“I never thought I would hear myself use this term but I really have to describe that news as fake news,” he said in remarks he made at the TechCrunch Disrupt Conference in San Francisco.

In fact, far from not opening a trading desk, Goldman is creating its own tradeable instrument for bitcoin; it sounds like the venerable investment bank is committed to crypto.

Chavez explained that the bank is crafting a bitcoin derivatives product of a type known as a “non-deliverable forward”.

“The next stage of the exploration is what we call non-deliverable forwards (NDFs), these are over the counter derivatives, they’re settled in U.S. dollars and the reference price is the bitcoin-U.S. dollar price established by a set of exchanges,”

NDFs are often used in less liquid markets such as emerging market foreign exchange, because the physical product never changes hands (hence non-deliverable) and instead the two parties to a trade settle on the basis of currency movements by either party making a netted cash settlement. Unlike with normal futures, the settlement takes place before the expiry date of the contract.

The bitcoin futures traded on the Chicago Board of Exchange, and its much larger competitor the CME, are cash-settled at the expiry date.

The Goldman chief said it was responding to “clients want it” in developing the product.

“The next stage of the exploration is what we call non-deliverable forwards, these are over the counter derivatives, they’re settled in U.S. dollars and the reference price is the bitcoin-U.S. dollar price established by a set of exchanges,” Chavez revealed in a CNBC interview.

He said the bank’s work “would be evolving over time” to no set timeline.

Chavez added: “Maybe someone who was thinking about our activities here got very excited that we would be making markets as principal and physical bitcoin, and as they got into it they realized part of the evolution but it’s not here yet.”

The chief executive said it would be  a “long road” to a physical bitcoin product because of the custody issues yet to be resolved.

Custody is an issue all mainstream financial institutions that are looking to crypto are grapppling with. It is one of the factors holding back an exchange traded fund from being approved by the US Securities and Exchange Commission.

Top 100 crypto by market cap – biggest risers in past 24 hours, 7 September 13:00 GMT

Pete Winston

I live and breathe crypto and have a small holding (BTC, ETH, EOS and XLM) that isn’t life-changing, so move along hackers! You can email me here: petewinston@coinintelnews.com