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Report: Wall Street banks are backing away from cryptocurrency

Wall Street banks are backing away from introducing cryptocurrency related products after the precipitous decline in their value this year, according to a report from Bloomberg.

Multiple leading firms had either announced or were rumored to be entering the market earlier in the year, but few have come to fruition. The report said that “while none has thrown in the towel, and some continue to develop a trading infrastructure, most flinched as the value of virtual coins collapsed.”

Notable among those firms was Goldman Sachs. In May it was reported that the company was preparing to launch a bitcoin trading desk that would involve the bank using its own money to trade with clients in a variety of contracts linked to the price of bitcoin. It was presumed that clients would include hedge funds that deal in cryptocurrencies as well as bitcoin futures contracts such as those launched by CME Group Inc. and Cboe Global Markets Inc. in 2017.

Fast forward to December and no such bitcoin trading desk has been launched.

In September it was reported that the plan had been abandoned, but a day later Goldman Sachs Chief Financial Officer Martin Chavez denied the report, saying that the bank’s “exploration of the digital asset class is an ever-evolving process and is in response to significant client interest.” He added that the report was “fake news.”

Others have been rumored to be looking at the market as well. Morgan Stanley was reported Sept. 13 to be is planning to offer bitcoin derivatives but like the offering from Goldman Sacks, nothing has come to market. The same month Citigroup Inc. was said to have developed a “digital asset receipt” that operates in a similar way to an American depositary receipt, but nothing has come of that either.

Although clearly not all plans have come to fruition, there is hope for new products in the new year. Leading the list is Bakkt, a service backed by the Intercontinental Exchange, the parent company of the New York Stock Exchange. It said it will offer bitcoin-settled futures contracts that subject to regulatory approval are expected to launch as soon as Jan. 30.

Whether this amounts of an end to the so-called “Santa Claus rally” or is simply a sign of a slowing market as investors take holidays, bitcoin ended its rally Christmas Eve, down 8.5 percent over the last 24 hours, to $3,820.53 as of 8:50 p.m. EST.

Photo: Pixabay

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