Goldman Sachs Starts Offering Bitcoin Derivative Products While Citi Group Considers Providing Crypto Custodial Services

As the famous saying goes “When you can’t defeat them, join them”. After years of Bitcoin bashing, traditional banking giants are now warming up to offering cryptocurrency services.

On Thursday, May 6, Wall Street banking giant Goldman Sachs started offering Bitcoin derivative product to Wall Street investors. As per the Bloomberg announcement, the investment bank initiated trading for non-deliverable forwards (NDFs), derivative product tied to the price of Bitcoin.

This product from Goldman doesn’t involve dealing with physical BTC but the settlement happens in cash. The investment has carefully decided upon by considering regulatory issues involving the coding of physical Bitcoins.

In order to protect itself and its clients from Bitcoin’s massive volatility, the NDFs will buy and sell CME bitcoin Futures in block trades. To offer this Bitcoin derivative product to its clients, Goldman Sachs has also joined hands with Cumberland DRW who will be its trading partner. Speaking to Bloomberg, Max Minton, Goldman’s Asia-Pacific head of digital assets said:

Institutional demand continues to grow significantly in this space, and being able to work with partners like Cumberland will help us expand our capabilities. The new offering is paving the way for us to evolve our nascent cash-settled crypto-currency capabilities.”

Interestingly, this announcement comes just a day after digital asset manager NYDIG announced that it is working along with fintech firm Fidelity National Information Services (FIS) to bring Bitcoin-related services to hundreds of banks in the U.S. by the end of this year.

Justin Chow, global head of business development for Cumberland DRW said: Goldman Sachs serves as a bellwether of how sophisticated, institutional investors approach shifts in the market. Weve seen rapid adoption and interest in crypto from more traditional financial firms this year, and Goldman’s entrance into the space is yet another sign of how it’s maturing.”

A source familiar with the matter also noted that Goldman Sachs might consider offering BTC-based exchange-traded notes to its hedge fund clients.

On the other hand, a report from The Financial Times noted that another banking giant Citi Group is considering dabbling into Bitcoin and crypto trading and custodial services. Itay Tuchman, Citi's global head of foreign exchange said: “"There are different options from our perspective and we are considering where we can best service clients. This is not going to be a prop-trading effort”.

Tuchman also noted that the bank won’t be rushing to jump into the crypto game. It will do its due diligence in terms of regulatory part and will only start once it is confident of building something that can benefit its clients.

"I don't have any FOMO [fear of missing out] because I believe that crypto is here to stay and that we are just at the very beginning of the market," he said. "This isn't a space race. There is room for more than just one flag."