Goldman Sachs Group Inc. is exploring offering over-the-counter bilateral crypto options, signaling the bank’s deepening participation in helping institutions trade digital-currency derivatives.
The powerhouse is among a few Wall Street banks at the early stage of exploring such offerings, according to people with knowledge of the matter, asking not to be identified discussing private information. The so-called bilateral options allow trades to be customized so that crypto holders such as hedge funds and Bitcoin miners can hedge risks or boost yields.
The market for these options, still in its infancy, has been dominated by crypto-native firms such as Genesis Global Trading Inc., Galaxy Digital Holdings Ltd., and GSR. Traditional trading giant DRW Holdings LLC has also jumped in as a liquidity provider.
Large Wall Street banks still aren’t active in the crypto spot market, handicapped by regulatory uncertainty, internal compliance procedures and “know your customer" rules. Goldman is offering options and futures trading in Bitcoin and Ether. Last year, it opened up trading of non-deliverable forwards, a derivative tied to Bitcoin’s price that pays out in cash.
The bank has seen demand for derivative-type hedging, and the development of an options market will be the next big step, Andrei Kazantsev, Goldman’s global head of crypto trading, said in a December panel hosted by CoinDesk. Goldman provides liquidity and takes risk on behalf of clients to facilitate larger trades, he said.
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