McDermott predicts substantial growth and maturation in the crypto space in the coming year, fueled by increased blockchain applications and the growing involvement of traditional financial institutions.
In a recent interview with FOX Business, Mathew McDermott, the head of digital assets at Goldman Sachs, shared insights into the evolving landscape of the digital assets market.
According to McDermott, the coming year holds promise for significant growth and maturity in the digital assets space, driven by the introduction of more commercial applications of blockchain technology and supportive regulatory measures.
McDermott highlights a notable trend over the past 12 to 18 months—the increasing participation of traditional financial institutions in the digital assets space. This involvement, he believes, signals a transformative phase for the industry, laying the groundwork for further expansion.
Gradual Transformation with Spot Crypto ETFs Approval
Despite the heightened anticipation surrounding the potential approval of spot crypto ETFs, the head of digital assets at Goldman Sachs suggests that an immediate transformation should not be expected. Instead, he envisions a gradual shift in the digital assets landscape over the coming year, assuming regulatory approval is granted.
Over a dozen firms, including financial giants like BlackRock and Fidelity, have submitted applications for spot bitcoin ETFs, awaiting approval from the U.S. Securities and Exchange Commission (SEC). According to McDermott, the market is optimistic that the regulator will approve bitcoin ETFs, marking a significant milestone for crypto.
Tokenization Use Case and Marketplace Development
McDermott places particular emphasis on the tokenization use case, predicting the development of marketplaces around this concept in the coming year. He sees the emergence of secondary liquidity on the blockchain as a key enabler for the adoption of tokenization, especially on the buy side with investors.
“When I think about tokenization, which is obviously a topic that’s kind of talked about quite extensively, I think for me next year what we’ll start to see is the development of marketplaces,” Mathew McDermott told Fox Business. “So where we start to see scale adoption, particularly across the buy side in the context of investors. And that’s because we’ll start to see the emergence of secondary liquidity on the chain, and that’s a key enabler.”
Earlier this year, Goldman Sachs launched its tokenization platform, GS DAP. The private blockchain was used in Hong Kong to sell $102 million of tokenized green bonds, showcasing the platform’s efficiency in reducing settlement time. McDermott envisions broader applications for GS DAP, including alternatives, fund units, derivatives, and private equity.
Spot ETF Approval’s Impact on Institutional Participation
Looking ahead, McDermott believes that the approval of spot exchange-traded funds (ETFs) for Bitcoin and Ethereum, expected in early 2024, will significantly impact the institutional investor landscape.
While institutional investors may not directly invest in the underlying assets, McDermott identifies two key outcomes: increased market liquidity and the creation of institutional products tradable by entities like pensions and insurers without directly handling the underlying assets.
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