New York may have caught the crypto bug. But one area of the city remains resistant: Wall Street.
Large crypto-conferences and related events converged on the nation’s financial capital this month, bringing thousands of bitcoin faithful with them. The largest with 8,000 attendees is the Consensus conference that began on Monday at the Hilton in midtown Manhattan. Twitter CEO Jack Dorsey is slated to talk about why he sees bitcoin as the future, and rapper Snoop Dogg was the headline draw at a “community night” sponsored by crypto startup Ripple.
Still, eight months after the first report that Goldman Sachs Group was planning a bitcoin trading desk, most other New York banks are resisting the idea of trading cryptocurrency. The Wall Street Journal contacted more than half a dozen banks, and none of them besides Goldman have any formal plans to start offering bitcoin or cryptocurrency derivatives as an option to their customers. And even specifics of Goldman’s plans are in flux as it works through a variety of issues, like risk management and regulatory compliance, according to a person familiar with the plans.
It’s not surprising that Goldman, “an entity that has traded anything and everything,” would be the first bank to walk through the door, said Gil Luria, director of institutional research at D.A. Davidson and longtime follower of bitcoin. Like Goldman, he said, most banks are satisfied at least that there’s a legitimate if small market in crypto trading. But all of them, Goldman included, are still wading through issues of stability, risk, and regulations.
Morgan Stanley is not building a trading desk, but it has begun arranging some trades of bitcoin-related products for some of its institutional clients, according to a person familiar with the bank’s plans. The bank is not planning to directly trade or hold bitcoin or any other cryptocurrencies. It is, however, exploring its options, including providing its institutional clients access to securities and derivatives, like futures contracts, based upon bitcoin, this person said.
Bitcoin, unveiled in 2008, is a digital currency linked over computers, without any one group being in charge. The volatile currency, which surged from $969 at the end of 2016 to a peak of $19,800 in December before falling back below $9,000, allows to users to exchange value directly without a third party like a bank or government.
Most of the big banks were initially skeptical. “Bitcoin likely can’t work as a currency,” Goldman Sachs wrote in a March 2014 report.
Since news of Goldman’s trading desk first appeared in October, there’s been an expectation that the rest of Wall Street would follow, but few if any real commitments. In April, some news sites said Barclays was talking about building a bitcoin desk. But the bank’s CEO, Jes Staley, said at the company’s annual meeting May 1 that it had no “plan to set up a trading desk specifically directed to cryptocurrencies.”
Citigroup, according to a person familiar with the bank’s thinking, is not going to get involved for at least the immediate future. Others including JPMorgan Chase & Co. and Bank of America are also in a “wait-and-see” mode.
In January, Merrill Lynch, a unit of Bank of America, banned its 17,000 financial advisers from buying bitcoin on behalf of clients. The firm was concerned that cryptocurrencies may not be suitable for its clients. Wells Fargo also prohibits its advisers from facilitating bitcoin trades for clients.
Another issue: banks are also hesitant about trading a currency where it’s difficult to know who’s on the other side of the trade, and whether or not a bank would unwittingly be abetting a money launderer.