Goldman Sachs Looking To Buy DiscountedCrypto Firms After FTX Collapse
According to a report by Reuters, financial services firm Goldman Sachs is looking to spend tens of millions of dollars on crypto firms whose valuations have been hit after the implosion of FTX.
Mathew McDermott, Goldman Sachs’ head of digital assets, stated that the firm sees “some really interesting opportunities, priced much more sensibly.”
Goldman plans to spend tens of millions of dollars to buy or invest in crypto companies over the next few months.
McDermott said “FTX’s implosion has heightened the need for more trustworthy, regulated cryptocurrency players, and big banks see an opportunity to pick up business.”
Without giving details, he added that Goldman is doing due diligence on a number of different crypto firms.
Regarding the FTX collapse, he said “It’s definitely set the market back in terms of sentiment, there’s absolutely no doubt of that. FTX was a poster child in many parts of the ecosystem. But to reiterate, the underlying technology continues to perform.”
While the amount Goldman may potentially invest is not super large for the Wall Street giant, which earned $21.6 billion last year, its willingness to keep investing amid the sector shakeout shows it knows there is long-term opportunity.
Goldman Sachs CEO David Solommon told CNBC on November 10, as the FTX drama was unfolding, that while he views cryptocurrencies as “highly speculative”, he sees much potential in the underlying tech as its infrastructure becomes more formalized.
Rivals like Morgan Stanley seem to be a bit 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 CEO James Gorman said at the Reuters NEXT conference on Dec. 1.
HSBC CEO Noel Quinn told a banking conference in London last week he has no plan to expand into crypto trading or investing for retail customers. (Though HSBC does provide crypto services for institutional investors).
Goldman has invested in 11 digital asset companies that provide services like compliance, cryptocurrency 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.
His team has grown to more than 70 people, including a seven-person crypto options and derivatives trading desk.
Together with MSCI and Coin Metrics, Goldman has also launched data service datonomy, aimed at classifying digital assets based on how they are used.
The firm is also building its own private distributed ledger technology.
The ripple effects from FTX’s collapse have boosted Goldman’s trading volumes, McDermott said, as investors sought to trade with regulated and well-capitalized counterparties.
“What’s increased is the number of financial institutions wanting to trade with us,” he said. “I suspect a number of them traded with FTX, but I can’t say that with cast iron certainty.”
Other firms see the crypto meltdown as a chance to build their businesses.
Britannia Financial Group is building its cryptocurrency-related services, its chief executive Mark Bruce told Reuters.
The London-based company aims to serve customers who are eager to diversify into digital currencies, but who have never done so before, Bruce said. It will also cater to investors who are very familiar with the assets, but have become nervous about storing funds at crypto exchanges since FTX’s collapse.
As always, at Keystone we recommend cold storage in a hardware wallet – don’t trust your crypto with any third party.
Britannia is applying for more licenses to provide crypto services, such as doing deals for wealthy individuals, he said.
“We have seen more client interest since the demise of FTX,” he said. “Customers have lost trust in some of the younger businesses in the sector that purely do crypto, and are looking for more trusted counterparties.”
SEBA Bank Partners With HashKeyFor Institutional Crypto Adoption
Regulated crypto bank SEBA Bank and digital asset financial services group HashKey have reportedly formed a strategic partnership to accelerate the institutional adoption of digital assets Hong Kong and Switzerland.
According to the terms of the partnership, HashKey will become SEBA Bank’s preferred digital asset trading and market development partner in Hong Kong, while SEBA Bank will become HashKey’s banking partner.
Franz Bergmueller, group CEO of SEBA Bank stated,
“With a supportive regulatory framework, HongKong is a leading jurisdiction globally in the licensing provision of crypto products and services. It is important that the SEBA group becomes part of this ecosystem as a trusted, secure and transparent counterparty in this regulated crypto environment.”
The Switzerland-headquartered SEBA Bank expanded into Hong Kong with a new office at the end of November. Earlier in November, HashKey obtained full licensing to provide crypto asset trading services from Hong Kong’s Securities and Futures Commission.
Stablecoin Issuer CircleCancels Plan To Go Public
On December 5th, Stablecoin issuer Circle announced the mutual termination of its proposed merger with the special purpose acquisition company (SPAC) Concord Acquisition Corp., effectively stepping back from its plan to go public.
Under the terms of the agreements, Concord had until Dec. 10 to consummate the transaction or seek a shareholder vote for an extension. However, it appears that Circle was unable to complete its SEC qualification in time and Concord chose to have the time limit lapse instead of extending it.
Circle CEO Jeremy Allaire stated,
“Concord has been a strong partner and has added value throughout this process, and we will continue to benefit from the advice and support of Bob Diamond and the broader Concord team. We are disappointed the proposed transaction timed out; however, becoming a public company remains part of Circle’s core strategy to enhance trust and transparency, which has never been more important.”
Circle said Monday that the boards of both companies approved the move.
The plans to go public were announced by Circle in July 2021, with a valuation of $4.5 billion. The valuation was later doubled when the firms amended their terms in February.
The firm also said that it turned profitable in the third quarter of this year and ended the quarter with almost $400 million in unrestricted cash.
The termination follows similar high-profile crypto firms canceling plans to go public via a SPAC, such as trading platform eToro in July and bitcoin miner PrimeBlock in August.
SPACs have become a common means of companies going public in recent years, with the SEC reporting in March that they accounted for half of all initial public offerings in 2020-21.
In March, the SEC said it would propose “specialized disclosure requirements with respect to, among other things, compensation paid to sponsors, conflicts of interest, dilution and the fairness of these business combination transactions,” in a sign that such listings would be subjected to greater regulatory scrutiny.
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