- Goldman Sachs is in talks to play the key role of “authorized participant” for BlackRock and Grayscale’s bitcoin ETFs if they get SEC approval.
- As an “authorized participant,” Goldman would buy and sell bitcoin to help provide liquidity and prevent the ETF’s shares from trading at too steep of a premium/discount.
- The SEC has rejected over a dozen bitcoin ETF applications so far, but firms are still hoping for approval. SEC concerns include fraud/manipulation in the bitcoin market.
Goldman Sachs is in talks to play the key role of being an “authorized participant” for BlackRock and Grayscale’s bitcoin ETFs, if the SEC approves them, according to people familiar with the situation.
Goldman’s Potential Role
As an “authorized participant,” Goldman would buy and sell bitcoin to keep the ETF’s price in line with the cryptocurrency‘s market value. This would help provide liquidity to the ETF and prevent its shares from trading at too steep of a premium or discount.
Goldman trading the actual bitcoin – rather than bitcoin futures contracts – would be a major step for the Wall Street bank. Goldman only recently began offering its clients access to bitcoin derivatives.
Being an authorized participant highlights the tricky calculus around bitcoin ETFs right now. While many firms want the cachet of being involved in launching such a high-profile product, it also comes with potential risks and complications.
The Approval Hurdle
The SEC has rejected over a dozen bitcoin ETF applications, though firms are still eagerly awaiting a green light.
SEC Chairman Gary Gensler has previously voiced concerns around fraud and manipulation in the bitcoin market. He has suggested that such issues would need to be addressed before an ETF could gain approval.
Bitcoin advocates counter that the market has matured in recent years and that fraud is no longer as big of an issue. Major financial institutions like Goldman Sachs becoming active in the space may also help sway regulators.
Conclusion
Goldman teaming up with BlackRock and Grayscale on potential bitcoin ETFs shows that Wall Street is moving closer to embracing cryptocurrencies. However, the firms still face an uphill battle for approval from a wary SEC. It remains to be seen whether bitcoin ETFs become a reality in 2022.
