New "milestone": Goldman Sachs and Galaxy Digital conduct the first OTC encryption options transaction

This article comes fromCNBC, original author: Hugh Son

Odaily Translator | Nian Yin Si Tang

Odaily Translator | Nian Yin Si Tang

Prior to March 10, Bloomberg Newsto reportto report

Goldman Sachs is exploring how to offer over-the-counter bilateral cryptocurrency options, suggesting the bank is deeply involved in helping institutions trade digital currency derivatives, the bank said. Goldman Sachs is one of a handful of Wall Street banks exploring such products, with bilateral options allowing for customized trades so that holders of cryptocurrencies such as hedge funds and bitcoin miners can hedge risk or boost yields.

CNBC has learned this time that the company is close to announcing that it is the first major U.S. bank to conduct over-the-counter crypto transactions. Goldman Sachs allegedly traded a bitcoin-related instrument called a "non-deliverable option" with crypto merchant bank Galaxy Digital.

The move is seen as a "big step" for institutional investors into the crypto market, partly due to the nature of over-the-counter trading. The banks took on greater risk as the principal of the transaction than Goldman Sachs did with the exchange-based CME Group bitcoin product it began trading last year, the companies said.

Damien Vanderwilt, co-president of Galaxy, said that as a top player in the global traditional asset market, Goldman Sachs' participation shows that such assets have increased maturity for institutional investors such as hedge funds.

“This transaction represents the first step for the bank to provide clients with direct, customizable exposure to the crypto market,” Vanderwilt said in an interview.

Options trading, Vanderwilt said, “is more systematically linked to the market than cleared futures or other exchange-based products.” At a higher level, that’s because of the risk that banks are taking on. They are implying that they believe in the maturity of cryptocurrencies. ’ he explained.In fact, Goldman Sachs and Galaxy Digital have reached multiple cooperations in the encryption field.The most recent collaboration took place in early March

. According to a regulatory filing with the U.S. Securities and Exchange Commission (SEC), Goldman Sachs is offering interested clients exposure to an ETH fund issued by Galaxy Digital. Sources in the institutional crypto trading space confirmed that Goldman Sachs is the feeder (sub-fund) of the Galaxy Fund. Previously, Galaxy also agreed to provide liquidity for Goldman Sachs’ bitcoin futures.At the same time, Goldman Sachs itself is constantly expanding its encryption team.News on March 11

, according to its LinkedIn page, Goldman Sachs is hiring a vice president of digital assets in the global markets department. The Digital Assets team is focused on defining and executing Goldman Sachs' distributed ledger technology (DLT), blockchain and cryptocurrency work firm-wide. The job content of this position includes developing new digital solutions externally on behalf of the company with other banks, fintech companies, suppliers and technology companies, in-depth understanding of various digital asset technologies and related partners to identify cooperation opportunities, etc.

According to Goldman Sachs and Galaxy Digital, hedge funds have been seeking derivatives exposure to bitcoin, either to bet on its price without directly owning it, or to hedge existing bitcoin exposure. The market for these tools is largely dominated by crypto-native companies such as Galaxy, Genesis, and GSR Markets.

Andrei Kazantsev, global head of cryptocurrency trading at Goldman Sachsexpressexpress

, the bank noted a lot of demand for options related to digital assets.