Goldman Sachs Plans to Introduce Three Tokenization Projects by Year End, Reveals Digital Assets Head

Goldman Sachs is looking to broaden its crypto offerings, with a particular focus on ventures in tokenization, a rapidly growing sector where tangible assets like money market funds and real estate are represented on public or private blockchains. The firm’s Global Head of Digital Assets, McDermott, revealed plans to roll out three tokenization projects before the year concludes, collaborating with major clients, including the initiation of its first project in the U.S.

While BlackRock and Franklin Templeton are also exploring tokenization, McDermott emphasized the importance of developing products that cater to investor preferences. To this end, Goldman Sachs recently hosted a digital assets summit in London, drawing over 500 clients. McDermott stressed the significance of aligning offerings with market demand, stating, “The definite feedback is, this is something that actually will change the nature of how they can invest.”

Following a challenging period in the crypto market triggered by the FTX collapse, a resurgence occurred this year, bolstered by the introduction of Bitcoin ETFs in January. Goldman Sachs played a pivotal role in these ETF launches by acting as an authorized participant, facilitating the redemption and creation mechanisms for investment vehicles such as BlackRock’s IBIT ETF.

McDermott hailed the ETF debut as a resurgence of momentum in the crypto sphere, although not all within Goldman Sachs share his perspective. In contrast, Sharmin Mossavar-Rahmani, Chief Investment Officer for Goldman Sachs Wealth Management, expressed skepticism about crypto as an investment asset class, noting a lack of client interest. McDermott acknowledged the diversity of opinions within the institution, highlighting Goldman Sachs’ active involvement in crypto from an institutional standpoint, encompassing the trading of cash-settled crypto derivatives and engagement in the ETF markets.

Tokenization remains a focal point of Goldman Sachs’ strategy, with past involvements including a bond issuance collaboration with the European Investment Bank and the tokenization of a sovereign green bond for the Hong Kong Monetary Authority. The establishment of the Goldman Sachs Digital Asset Platform in 2023 further underscores the firm’s commitment to facilitating asset tokenization.

The notable tokenization launch this year was BlackRock’s treasury fund BUIDL, which amassed $500 million and operates on the Ethereum blockchain. McDermott highlighted distinctions in approach, with BlackRock and Franklin Templeton targeting retail customers, while Goldman Sachs concentrates on institutional clients, primarily utilizing private blockchains due to regulatory constraints. The bank aims to establish marketplaces for tokenized assets, enhancing transaction speed and expanding the range of collateralizable assets.

While specifics about the upcoming tokenization projects were not disclosed, McDermott hinted at initiatives focusing on the U.S. fund complex and debt issuance in Europe. Looking ahead to potential regulatory shifts following the U.S. presidential election, McDermott anticipates expanded opportunities for Goldman Sachs in the crypto space, potentially including the ability to hold spot crypto assets and engage in execution and sub-custody services, pending regulatory approval.