Bank executives have been skeptical about cryptocurrencies from the very beginning.
Goldman Sachs’ Chief Executive Lloyd Blankfein said: “Something that moves 20% [overnight] does not feel like a currency. It is a vehicle to perpetrate fraud.”
Jamie Dimon, CEO of J.P. Morgan Chase, one of the loudest Bitcoin critics, called cryptocurrencies a “fraud” at a banking event. He later said he regrets his comment.
It’s not surprising that bank CEOs are not a fan of cryptocurrencies. However, when it comes to blockchain technology in general, they seem to be more enthusiastic.
Even Jamie Dimon said, “Blockchain is real,” although he also quickly added that he is “not interested that much in the subject.”
Maybe he isn’t, but his colleagues at Goldman Sachs seem very interested. Goldman’s website reads:
“A new technology is redefining the way we transact. If that sounds incredibly far-reaching, that’s because it is. Blockchain has the potential to change the way we buy and sell, interact with government and verify the authenticity of everything from property titles to organic vegetables.”
Goldman led strategic round in blockchain payments startup Veem
There is more to Goldman’s blockchain interest than just big words on a website. The bank is also taking action.
Goldman has led a $25 million funding round for blockchain payments start-up Veem in September 2018. The bank has invested via its Principal Strategic Investment Group and one of its Managing Directors will sit on Veem’s board as a non-voting member.
Amongst others, Veem has also received funding by GV, formerly known as Google Ventures. Veem uses Bitcoin to connect clients’ bank accounts with suppliers. The company says it serves 80,000 small businesses in 96 countries.
Axoni received funding from several Wall Street banks, including Goldman
Veem is not Goldman’s only blockchain investment.
Earlier this year, Goldman Sachs and Nyca Partners have led a Series B round in enterprise blockchain startup Axoni. The company has raised $32 million to complete some of its ongoing blockchain projects.
Axoni is moving some of the largest global financial infrastructures to technology that runs on the Ethereum blockchain. One of those projects includes moving the Depository Trust and Clearing Corporation’s $11 trillion Trade Information Warehouse onto a blockchain.
Goldman invested alongside other financial institutions such as Wells Fargo, J.P. Morgan (yes, Jamie Dimon’s J.P. Morgan), NEX Group, and others.
Axoni co-founder and CEO Greg Schvey says, “These are very strategic investors. We have deep strategic and commercial engagements with most of them.”
Goldman has put plans for crypto trading desk on ice
Thus, despite banking executives downplaying blockchain and especially cryptocurrencies, they do have a real interest in the technology. So far, most banks prefer to invest in third-party blockchain companies instead of taking the initiative themselves.
That said, Goldman did have plans for its own crypto trading desk. However, according to a report in Business Insider, citing people “familiar with the matter,” the bank has temporarily dropped these plans. Reasons behind the retreat were mostly regulatory concerns, which are outside of the bank’s control.
“At this point, we have not reached a conclusion on the scope of our digital asset offering,” Goldman Sachs spokesperson Michael DuVally told Reuters.
More than 30% of all blockchain solutions are designed for the banking sector. Thus, there is no way banks can ignore the blockchain trend. And they don’t. The statements made by bank executives in this regard are just rhetoric. Behind the scenes banks are paying attention.