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Goldman Sachs' digital asset team will hire more people and explore the potential of blockchain technology to enhance the operation of more markets like private equity.
That comes a month after the Wall Street giant's biggest layoffs since the financial crisis. Most of the bank's major departments were expected to be affected, with the most job cuts happening in its investment banking arm.
But the digital assets team was poised to hire, suggesting the firm's outlook for its new blockchain tech is solid.
Mathew McDermott, the global leader of the digital team, said that the bank is still "hugely supportive" of researching blockchain applications and that the digital assets division will make job offers "as appropriate" in 2023.
McDermott said that in his speech this week in Hong Kong, where the city had just sold its first digital green bonds using Goldman's blockchain tokenization paltform, GS DAP.
Currently, his team has almost 70 members, compared to just four in 2020, when he started.
Two people familiar with the plans who did not want to be named said the headcount could rise to 100 members this year.
What Job Cuts? Goldman Bets Big On Blockchain
With a market crash of $1.5 trillion in 2022 and the implosion of the FTX exchange, the cryptocurrency industry is also hurting from the thousands of job cuts.
Even though the value of tokens has been pretty stable this year, crypto-related job openings are still more of an exception than the rule.
Still, Goldman's plans to increase headcount when big global firms are laying off staff by the thousands underscore the Wall Street giant's bet on blockchain technology and its digital assets team's outlook.
Unlike public blockchains like Ethereum, Goldman's GS DAP is secure for its users only.
The settlement duration was shortened from five days to just one day after the trade when Hong Kong used the GS DAP to sell HK$800 million ($102 million) in tokenized green bonds.
"The blockchain platform allows investors to see more data, have more transparency, and have more accurate pricing on an asset, which will then encourage more liquidity and hopefully bring in more investors in the secondary market," McDermott said.
He expects GS DAP to be used for other assets such as alternative investments, fund units, derivatives, and private equity.
McDermott also noted that the processes of settlement and pricing in the public issue of shares (IPO) and equity markets are now sufficiently efficient.
Tokenisation & Blockchain
Despite the monthly dividend payments that are the backbone of debt instruments, the issuing process is sometimes slowed by factors such as manual processes and lengthy settlement timeframes.
As a result of tokenization, loan issuers can use automation to address these inefficiencies.
When it comes to distributed ledgers, tokenization has long been seen as a promising use case.
Those in favor argue that it can facilitate the purchase and sale of illiquid assets such as private equity and that investments like bonds would experience faster settlement.
Nonetheless, development has been slow, and general crypto scepticism has been exacerbated by FTX's collapse and other blowups.
While the faster settlement duration has been the USP of Goldman Sachs' blockchain platform, McDermott predicted that it could be years before regulators felt comfortable moving large financial transactions onto public blockchains.
Over the past year, investment management companies, private markets investment companies, and cryptocurrency exchanges have all jumped on the tokenized funds bandwagon.
Large investment management companies and cryptocurrency exchanges are thinking about a variety of products in the space.
Asset tokenization, wherein an issuer generates digital tokens on a distributed ledger or blockchain to represent either digital or physical assets, will grow into a US$16.1 trillion market by 2030, or about 10% of the global GDP, with most of that value coming from private markets, according to research by Boston Consulting Group (BCG) and ADDX.
The analysis of that report also predicts that the market's potential value might reach US$68 trillion in the best-case scenario.
With the scope playing out, Goldman is poised to exploit the potential of the new technology and is looking to expand its digital team.
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