Cryptocurrency won’t achieve exposure to institutional investors until better custody solutions are created, according to Goldman Sachs head of digital asset markets Justin Schmidt. Schmidt made the comments during a panel discussion at the Consensus Invest conference in New York, where he said that the bank repeatedly has to tell clients that it cannot look after their coins. This is due to SEC rules on asset custody, which has seen digital asset investors targeted recently.
BAKKT and Fidelity Currently Not Enough
Bitcoin and other cryptocurrencies have been on the radar of a number of banks who don’t want to miss out on the money-making volatility, but being wary of investing directly has led to them exploring alternative routes, such as futures trading and investing in Bitcoin related companies. Despite some banking brands, like Goldman Sachs, considering establishing crypto trading desks. Schmidt did say the arrival of BAKKT and investment firm Fidelity to the cryptocurrency ecosystem was a sign of progress, but that traditional investors were still wary of the asset class:
Custody is part of an overall integrated system where different parts need to work well with each other and safely with each other and you have to be able to trust all the different parts in that chain, from buying something to transferring it to storing it in for the long-term. I very much look forward to companies that are actually providing institutional-grade products and services.
Hurdles Still Exist
Schmidt added that additional hurdles would need to be cleared even after the custody problem was resolved, believing that constant news reports of exchange hacks and other coin thefts would still concern potential investors. Institutional investment is still a topic that divides cryptocurrency fans, but a recent report from KPMG stated that institutionalization was essential for cryptocurrency to reach its full potential. Schmidt also said at the conference that the 2018 collapse in crypto valuations was “healthy” for the ecosystem, because it would eradicate the talk about price and allow more focus on building better products.