Wall Street bank Goldman Sachs is a doubter no more. This week the president of the storied financial institution, John Waldron, labeled his bank's ranks "believers" in the future of digital money and blockchain technology.
"We're big believers in digital money," he said at the Wolfe Research fintech conference Wednesday. "There's no question in our mind, there's going to be more digital commerce, a lot more, an explosion in digital commerce," Waldron told the Wolfe Research fintech forum, according to a transcript of his remarks. "And digital money will explode likewise."
Like some of its Wall Street peers, Goldman has done an about-face on digital assets. Just last year, the bank said cryptocurrencies were "unsuitable investments" for its clients. But then this year the bank reportedly reopened a cryptocurrency trading desk after halting its operations in 2018, shortly after its launch, over concerns about volatility.
The company is "very engaged" with central banks on the topic of digital money, he said. With its full-throated support now, Goldman seems to be bending to customer demand, with clients increasingly asking "a lot more questions" particularly about bitcoin, the biggest cryptocurrency, Waldron said.
Big banks have had on-again, off-again relationships with bitcoin as the price of the cryptocurrency took a wild ride over the past few years, rising to nearly $18,000 in late 2017 and then plunging close to $3,200 the following year, before skyrocketing this year over $55,000.
The payments industry is increasingly embracing and pushing ahead with digital forms of transactions because they can allow more efficient and more lucrative use of capital. Cryptocurrencies, of which there are hundreds of varieties, are one form of digital payment. Nonetheless, regulators have expressed concerns about the emerging payment systems and regulation in the arena is still developing.
Like Goldman, banking behemoth JPMorgan Chase was down on cryptocurrencies, with CEO Jamie Dimon famously calling bitcoin "a fraud" in 2017, but that bank has also warmed to the sector this year, extending its services to crypto exchanges Coinbase and Gemini.
The value of bitcoin is stored on a shared digital ledger that the owner can unlock with a crypto key and is based on blockchain technology, which has a variety of applications.
"We think the blockchain technology is a really important development, and we think it has the potential for extremely attractive applicability broadly defined," Waldron said. He noted, for instance, it could be useful in the settlement of transactions. "So, we're believers that blockchain has real durability as a technology and as a way to continue to innovate in the marketplace," Waldron said. "We're obviously investing in that ... we're pretty actively engaged in it."
With respect to bitcoin specifically, he lauded its rise, but also noted that bank regulations restrict Goldman from treating the cryptocurrency like other standard currencies.
"It's obviously an interesting prospective asset, potential store value," Waldron said. "The client demand is rising. As a regulated bank, we are limited in what we can and can't do. So we could custody, but can't principle Bitcoin as an example."
For now, Waldron said the bank is keeping tabs on developments, listening to clients on the topic, and navigating the new terrain with an eye to learning more in the near-term.