Goldman Sachs Launches Independent Digital Assets Platform to Boost Private Blockchain Use in Finance

Goldman Sachs is taking a big step by launching a separate digital assets platform. This move aims to boost the use of private blockchain technology in finance. They announced this exciting news in a press release on Monday.

The new platform will operate independently from the bank. They’ve partnered with TradeWeb, an electronic trading firm, to help make this happen.

Mathew McDermott, who leads Goldman’s digital assets division, shared his thoughts in an interview with Bloomberg. He said, “It’s in the best interest of the market to have something that is industry-owned.” This shows their commitment to creating a trustworthy platform.

Currently, Goldman Sachs uses a private blockchain. This means they require permission to send transactions. It’s different from public blockchains like Ethereum and Solana, which allow anyone to participate without permission.

Other big players on Wall Street, like JPMorgan Chase, are also using private blockchains. However, these efforts have faced challenges. Many firms are hesitant to use systems created by their competitors.

By launching this platform as a separate entity, Goldman Sachs hopes to ease those concerns. They want to expand the use of private blockchains for things like fund tokenization and issuing collateral for financial transactions.

Goldman Sachs first introduced its digital assets platform back in November 2022. It was designed to issue and settle trades of blockchain versions of financial assets, such as bonds. But since it relied solely on a private blockchain, it didn’t get much attention from the broader crypto community.

Now, with more Wall Street firms recognizing the potential of blockchain technology, Goldman Sachs sees a great opportunity. Yet, private blockchains aren’t the top choice for many financial institutions because they offer less liquidity.

Lamine Brahimi, co-founder of the tokenization platform Taurus, explained this well. He said, “When they have the choice, financial institutions are rolling out production on public blockchains. When they don’t have the choice, they do it on a permissioned one.”

In the U.S., banks are limited to private blockchains due to a rule from the Securities and Exchange Commission known as SAB-121. This rule creates accounting obligations for companies to safeguard crypto assets for platform users. Unfortunately, these obligations can’t be met on public blockchains, making it tough for U.S. firms to issue and trade traditional financial assets there.

Still, there’s hope that things might change. President-elect Donald Trump has hinted at a more lenient approach to crypto. Many of his rumored appointees for key roles, like the SEC chair, want to create tailored crypto rules to lighten the regulatory load on U.S. crypto firms.

The plans for Goldman Sachs’ spin-out firm are still in the early stages. Nothing is stopping this new venture from exploring public blockchains in the future, especially if regulatory conditions improve. The firm also plans to continue researching financial applications of blockchain technology with its current team.