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Traditional Finance Moves Quickly: Goldman Sachs Digital Assets Leader Matthew McDermott Discusses Institutional Acceptance of Tokenization

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Goldman Sachs, a long-standing investment bank, is diving deeper into the world of cryptocurrency, according to their global head of digital assets, Mathew McDermott. McDermott, with nearly two decades of experience at the bank, played a key role in establishing its digital asset desk in 2021. Since then, he has led efforts to introduce various products and services, such as liquidity in cash-settled derivatives, options, and futures crypto trading.

During the Consensus 2024 event, McDermott discussed a range of topics, including the growing popularity of tokenization and the potential for additional crypto-based exchange-traded funds (ETFs) following the success of bitcoin ETFs. The approval of these ETFs has reinvigorated retail interest in the crypto market and attracted new types of institutions, marking a significant shift in the industry’s perception.

While the U.S. Securities and Exchange Commission has recently approved applications for Ethereum (ETH) ETFs from several major exchanges, including Cboe, NYSE Arca, and Nasdaq, the process for approving ETFs from other issuers like Ark Invest, Bitwise, BlackRock, Fidelity, and Grayscale may take more time. McDermott believes that the approval of ETH ETFs could pave the way for other cryptocurrencies like Solana (SOL) to become tradable ETFs.

Goldman Sachs was an early adopter of the tokenization trend, though they have primarily used private, permissioned blockchains instead of open blockchains due to regulatory uncertainties. McDermott emphasized the benefits of tokenization in improving firms’ operating efficiency and increasing liquidity by attracting a broader range of investors.

McDermott sees the tokenization trend as a powerful means of “digitizing the lifecycle” of asset issuance, allowing for fractionalization and offering to a wider investor base. This not only broadens the distribution channel but also enhances secondary liquidity. As Goldman Sachs continues to explore tokenization, McDermott believes that the market has significant potential to expand into various asset classes, such as real estate and green debt issuance.

Looking ahead, McDermott believes that as regulations become clearer, more institutions will enter the blockchain space, leading to the transformation of parts of the financial system to operate more efficiently. While traditional banks may not be replaced entirely by cryptocurrency, institutions like Goldman Sachs recognize the potential for crypto to revolutionize the financial industry and improve operational efficiency significantly.

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