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

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

FTX’s implosion has increased the need for other trusts, legal cryptocurrency players, and big banks see opportunities to raise business, Mathew McDermott, Goldman’s head of digital assets, told Reuters.

Goldman is doing due diligence on many different crypto companies, he added, without elaborating.

“We see some very exciting opportunities,” McDermott said in an interview last month.

FTX filed for Chapter 11 bankruptcy protection in the United States on November 11 after its dramatic failure, sparking media fears and calls for more crypto regulation.

“It’s definitely holding the market back in terms of impact, there’s no doubt about that,” McDermott said. “FTX is a poster child in many areas of the environment. But to reiterate, the underlying technology continues to work.”

Although Goldman’s potential investment is not large for the Wall Street giant, which earned $ 21.6 billion last year, its willingness to continue investing in the middle of the shakeout region shows that it has a long-term opportunity.

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Its CEO David Solomon told CNBC on Nov. 10, as the FTX film is developing, and although he views cryptocurrencies as a “great speculation”, he sees great potential in the underlying technology as his infrastructure getting better and better.

Competitors are also skeptical.

“I don’t think it’s empty or going away, but I can’t put any value in it,” Morgan Stanley ( MS.N ) CEO James Gorman said at a Reuters NEXT conference on Dec. 1.

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

Goldman has invested in 11 digital companies that offer services such as hosting, cryptocurrency data and blockchain management.

McDermott, who competes in triathlons in his spare time, joined Goldman in 2005 and rose to market its digital assets after serving as its head of investment banking.

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Its team has grown to over 70 people, including seven strong crypto options and derivatives trading desks.

Goldman Sachs has also partnered with MSCI and Coin Metrics data company datonomy, to classify digital assets based on how they are used.

The firm is building its own distributed mail technology, McDermott said.

‘Trust’ players

The global cryptocurrency market peaked at $2.9 trillion in late 2021, according to data site CoinMarketCap, but shed about $2 trillion this year as the central bank tightened credit and a string of high-profile corporate failures hit. It ended at $865 billion on December 5.

The negative impact from the FTX failure has boosted Goldman’s trading value, McDermott said, as investors seek to trade with more structured and efficient partners.

“What is increasing is the number of financial institutions that want to do business with us,” he said. “I think most of them trade in FTX, but I can’t say that for cast iron.”

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Goldman also sees job opportunities as crypto and technology companies lay off workers, McDermott said, although the bank is happy with its current team numbers.

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

Britannia Financial Group is building cryptocurrency-related services, its CEO Mark Bruce told Reuters.

The London-based company aims to serve customers who are eager to convert into digital currency, but who have never done so before, Bruce said. It will also satisfy those investors who are well-versed in wealth, but are afraid to save money in crypto exchanges since the FTX crash.

Britannia is applying for additional licenses to provide crypto services, such as trading for the wealthy, he said

“We’ve seen more customer interest since the demise of FTX,” he said. “Consumers have lost confidence in some of the growing businesses in the region that only do crypto, and are looking for more reliable partners.”

Reporting by Iain Withers and Lawrence White, editing by Lananh Nguyen and Alexander Smith

Our principles: Thomson Reuters Trust Principles.

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