If you can’t beat ’em, join ’em. That’s the prevailing mindset on Wall Street when it comes to crypto. The latest to (re)-hop on the bitcoin/blockchain bandwagon is Goldman Sachs CEO David Solomon.
Solomon told French financial newspaper Les Echos that Goldman Sachs is “absolutely” considering its own cryptocurrency — following the lead of rival JPMorgan, which is testing its JPM Coin.
In fact, Solomon says you should assume that all major investment banks are considering making a foray into crypto.
“Absolutely! Many people are looking in this direction. But it is too early to say which platform will prevail…Assume that all major financial institutions around the world are looking at the potential of “tokenization,” “stable wedge” and frictionless payments.”
When asked if Goldman Sachs is talking to Facebook about its Libra crypto project, Solomon coyly suggested that it’s likely.
Solomon says he can neither confirm nor deny if Goldman has been in discussions with Facebook. However, he admits that the disruptive potential of blockchain and cryptocurrencies is undeniable.
“I can not comment on any discussions we may have with our clients. What I can tell you is that I find the principle interesting. We do extensive research on the concept of “tokenization,” the potential of which we believe, and which designates the creation through the blockchain of a stable digital currency based on a basket of real currencies that can move money across borders and without friction. This is the direction in which the payment system will go.”
Like other investment banks, Goldman Sachs has flip-flopped on the subject of cryptocurrencies. In April 2019, David Solomon testified before Congress that Goldman never had any concrete plans to launch a crypto trading desk.
His denial contradicted rumors dating back to December 2017. Perhaps not surprisingly, those rumors erupted at the height of the bitcoin bull market, when the bitcoin price approached $20,000.
Equally not surprising is that Solomon issued a strong denial about Goldman wading into crypto while speaking to the U.S. Congress. Lawmakers around the world are divided about the role that crypto should play in the global financial markets.
David Solomon says governments are closely scrutinizing the burgeoning industry, so he believes that regulations are coming.
When asked if he thinks cryptocurrencies like bitcoin are a threat to investment banks, Solomon said no. However, he says banks must evolve to adapt to whatever disruptive changes that cryptocurrencies will usher in.
“I do not think banks will disappear because of [cryptocurrencies]. Admittedly, they will have to evolve, because the trades linked to the payment flows will become less profitable. There are many other reasons why banks must remain innovative, otherwise they will disappear.”
While the media headlines constantly screech about an impending financial crisis and stock market crash, the Goldman CEO is confident that neither will happen.
Solomon concedes that there are there are geopolitical tensions that could destabilize the global economy, but he’s not worried about a financial apocalypse anytime soon.
“I do not anticipate a major financial crisis in 2020. At this moment, there is a huge monetary policy effort to support growth in the world. The risk of economic growth experiencing a sudden inflection in the short term seems weak. Of course, the geopolitical context can change the game, but invoking the risk of a financial crisis is a different story.”