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News/Goldman Sachs to Expand into Tokenization with Three New Products

Goldman Sachs to Expand into Tokenization with Three New Products

Van Thanh Le

Jul 11 2024

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Goldman Sachs Embarks on Tokenization Ventures

Goldman Sachs plans to introduce three new tokenization projects by the end of 2024, aiming to meet the rising demand for digital and tokenized real-world assets (RWAs). These projects will cater specifically to financial institutions, leveraging permissioned blockchains for regulatory compliance.

One of the upcoming projects will focus on the US fund complex, while another targets debt issuance in Europe. The third project aims to enhance transaction speeds and diversify collateral asset types. This move follows increasing client interest in crypto and digital assets, fueled by the success of Bitcoin ETFs. 

Since January 2024, nearly a dozen Bitcoin ETFs have been listed, with spot Ether ETFs anticipated to start trading soon. Funds like BlackRock's USD Institutional Digital Liquidity Fund and Franklin Templeton’s OnChain US Government Money Fund are gaining traction, highlighting a trend towards institutional adoption.

Number of real-world asset transactions onchain since December 2023.webp
Number of real-world asset transactions onchain since December 2023. Source: Dune

Recently, Goldman Sachs hosted a digital asset summit in London, drawing over 500 clients, underscoring strong institutional interest. The bank plans to capitalize on the trend of tokenizing RWAs, including money market funds and real estate holdings, on blockchains such as Ethereum and Solana

The upcoming US presidential election may soften regulatory stances on the crypto industry, potentially expanding opportunities for Goldman Sachs to enter areas like execution and sub-custody of crypto assets.

Mathew McDermott, Global Head of Digital Assets at Goldman Sachs, is optimistic about crypto, although some internal skepticism remains. Sharmin Mossavar-Rahmani, CIO of Wealth Management, questions crypto's reliability as an investment class due to valuation challenges. 

Despite this, consulting firms like McKinsey and Boston Consulting Group project the RWA tokenization market to grow into a multi-trillion dollar sector by 2030. The approval of Bitcoin spot ETFs in January 2024 marks a significant milestone, setting the stage for broader RWA tokenization adoption.

Potential Scale of Tokenization Adoption.webp
Potential Scale of Tokenization Adoption. Source: McKinsey

Goldman Sachs aims to stand out by focusing on institutional clients and utilizing private blockchains, differentiating itself from competitors like BlackRock, Franklin Templeton, and Fidelity. According to Mathew McDermott, “The definite feedback is, this is something that actually will change the nature of how they can invest.” The bank's tokenization projects are poised to potentially revolutionize asset management strategies and significantly impact capital markets in the long term.

Conclusion

Goldman Sachs' foray into tokenization signifies a major shift in institutional finance. With three new projects planned, the bank is positioning itself at the forefront of digital asset innovation, potentially reshaping investment strategies and capital markets for years to come.

FAQs

1. What are the three tokenization projects Goldman Sachs is planning?

One project focuses on the US fund complex, another on debt issuance in Europe, and the third aims to enhance transaction speeds and diversify collateral asset types. These projects will use permissioned blockchains to ensure regulatory compliance for financial institutions.

2. How has the success of Bitcoin ETFs influenced Goldman Sachs' decision?

The success of Bitcoin ETFs, with nearly a dozen listed since January 2024, has fueled client interest in crypto and digital assets. This increased demand has prompted Goldman Sachs to expand its tokenization efforts to meet institutional needs.

3. What is the projected growth of the RWA tokenization market?

Consulting firms like McKinsey and Boston Consulting Group predict the RWA tokenization market will grow into a multi-trillion dollar sector by 2030. This projection underscores the potential impact of Goldman Sachs' tokenization initiatives on the financial industry.

4. How does Goldman Sachs plan to differentiate itself in the tokenization space?

Goldman Sachs aims to stand out by focusing on institutional clients and utilizing private blockchains. This approach differs from competitors like BlackRock, Franklin Templeton, and Fidelity, potentially giving Goldman Sachs an edge in serving specific institutional needs.

This article has been refined and enhanced by ChatGPT.

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