Reports indicate that Goldman Sachs is preparing to set up a Bitcoin (BTC) trading operation. This will be the first time a mainstream Wall Street bank will be making such a move. Initially, Goldman Sachs will not be involved in the buying and selling of actual bitcoins. However, it could pursue that option if it receives approval from regulators. It will then have to figure out ways of handling the extra risks that come with dealing with digital currencies.
The move by Goldman Sachs is interesting to say the least. According to the creator of Bitcoin, Satoshi Nakamoto, the idea of the digital currency was to replace Wall Street banks. It could now be providing them with a new income stream.
Increase in interest
Prior to this move by Goldman Sachs, the last two years have seen an upsurge in interest in the cryptocurrency. Taking notice have been hedge funds, investors, tech firms and commodity exchanges. Last December, Chicago based commodity exchanges began allowing customers to trade in the futures contract of Bitcoin.
Until Goldman’s announcement, regulated investment banks have stayed away from Bitcoin. Some of these financial institutions have even closed down accounts belonging to customers involved in the trading of the digital currency. The chief executive officer of JPMorgan Chase, Jamie Dimon, is on record as having called Bitcoin a fraud. Other senior banking executives have labelled the cryptocurrency a speculative bubble.
Neither a fraud nor a currency
One of the executives at Goldman responsible for setting up the Bitcoin trading operation is Rana Yared. According to her, the investment bank has come to the conclusion that the cryptocurrency is not a fraud. Though, Goldman also believes it lacks the characteristics that would qualify it as a currency. Just like gold, Goldman’s clients want to use it as a store of value since there is a limit to its supply. This is because the maximum number of bitcoins that will ever exist is 21 million.