Goldman Sachs is Also Sweating on Cryptocurrencies as a 'Business Risk'


Goldman Sachs Lists Cryptocurrencies as Business Risk

The firm made this revelation in a document dated Feb. 26 and filed with the US Securities Exchange Commission (SEC), explaining that its investments in blockchain- and cryptocurrency-associated startups -- as well as its choice to ease Bitcoin futures trading for its brokerage customers --  could negatively impact Goldman Sachs if weaknesses are found in the underlying blockchain protocols.

"We might be, or might become, exposed to risks related to distributed ledger technology through our facilitation of clients' activities involving financial products linked to dispersed ledger technology, such as blockchain or cryptocurrencies, our investments in companies that seek to build platforms based on dispersed ledger technology, and using distributed ledger technology by third-party vendors, clients, counterparties, clearing houses and other financial intermediaries."

Despite the sometimes-hostile comments on Bitcoin of Blankfein, the company has built a portfolio that includes startups.

Circle, to which funding was provided by it, recently announced that it had obtained one of the exchanges, Poloniex and functions a high-volume cryptocurrency trading desk.

Banks Feel the Crypto Heat

As CCN reported, Bank of America admitted in a Feb. 22 filing that possible mass adoption of cryptocurrencies presents the institution -- second-largest in the US as measured by total assets -- with a number of risk vectors.

Other institutions Bank of America -- view the nascent asset class as a fundamental threat to their business models while Goldman's concerns about cryptocurrency stem from its ownership stakes in blockchain startups.

Some of the risks are operational, such as the fact that the lender may need to update its anti-money laundering system to better account for cryptocurrency usage.

Others, are more foundational. The lender said, for instance, that the company would probably need to make "substantial expenditures" to upgrade and expand its present products and services to remain competitive with biotech startups, some of whom are leveraging blockchain technology to interrupt the banking sector. The firm admitted that, due to the stance on buys, the lender risks losing customers to businesses which more readily embrace them.