Crypto Milestone: Goldman Sachs Completes First Over-the-Counter Bitcoin Trade — What Are the Advantages?

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In an industry first, Goldman Sachs announced it had executed the first over the counter (OTC) cryptocurrency transaction with Galaxy Digital on Mar. 21, reflecting the bank’s continued expansion of crypto offerings and demonstrating the continued maturation and adoption of digital assets by banking institutions.

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The first OTC crypto transaction was in the form of a Bitcoin non-deliverable option (NDO) and also represents a continuation of the Bank’s partnership with Galaxy Digital to deepen its crypto capabilities, which included facilitating the Bank’s first CME Group Inc. Bitcoin futures transaction last year, according to a press release.

“We are pleased to continue to strengthen our relationship with Goldman and expect the transaction to open the door for other banks considering OTC as a conduit for trading digital assets,” Damien Vanderwilt, Co-President and Head of Global Markets at Galaxy Digital, said in the release. “Goldman’s continuing trust in us is a testament to Galaxy’s expertise and ability to meet the evolving demands by institutions as crypto solidifies itself as the fifth asset class.”

Many in the industry view this development as very positive, not only for an increasing adoption of crypto and the evolution of the asset class, but also for opening the door to other institutions to follow suit and trigger potentially faster regulatory approvals of crypto products.

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Larry Felix, co-founder and CEO of Noteworthy, told GOBankingRates that Goldman Sachs and Galaxy Digital cooperating on the first crypto OTC trade could encourage other companies to start offering OTC services.

“OTC trading could open up new avenues for mainstream traders to access crypto markets, and although this trade was for Bitcoin, its big advantage will be opening access to more obscure crypto products through traditional finance,” Felix said, adding that given the SEC’s hesitancy to approve crypto-related products, including a spot Bitcoin ETF and others, the OTC trading market is primed to explode if banks like Goldman invest in their crypto OTC desk.

“There are lots of investors who want exposure to crypto — including small coins and DeFi products — and OTC trading desks for crypto will allow them to gain exposure to those without having to put their money directly into DeFi,” Felix said. “I would be surprised if other major investment banks don’t follow Goldman’s lead here, as I expect Goldman’s services to be in demand. It’s high time that mainstream investors are able to have easier access to crypto, and OTC trading can make that happen.”

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Several insiders agree with the view that big banks making these kinds of moves might speed up regulatory processes and frameworks around cryptos.

Josh Goodbody, COO at Qredo, told GOBankingRates that the SEC has been behind in creating a regulatory framework for this new asset class, “and so you’re starting to see the institutions just rushing in and going about it their own way — that is, in a responsible way, of course.”

“But there’s just too much upside to be had right now to miss out on, and so the big dogs in town are aping in, as they say. That’s not to say that this isn’t unregulated in any sense, but the rules of the game are being made on the ground and by the big players as we speak,” Goodbody added.  “Which is probably how it should be. So, in short, the big institutions are getting in after years of criticizing crypto, and then soon this will transform our regulatory landscape in a likely favorable direction. This is all a good, good sign for harnessing crypto’s benefits.”

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About the Author

Yaël Bizouati-Kennedy is a full-time financial journalist and has written for several publications, including Dow Jones, The Financial Times Group, Bloomberg and Business Insider. She also worked as a vice president/senior content writer for major NYC-based financial companies, including New York Life and MSCI. Yaël is now freelancing and most recently, she co-authored  the book “Blockchain for Medical Research: Accelerating Trust in Healthcare,” with Dr. Sean Manion. (CRC Press, April 2020) She holds two master’s degrees, including one in Journalism from New York University and one in Russian Studies from Université Toulouse-Jean Jaurès, France.
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