Goldman Sachs anticipates a surge in security token trading

The crypto manager from Goldman Sachs forecasts a significant increase from trading d’digital assets at 2024 in particular thanks to development of security tokens.

According to McKinsey, tokenization is well on the way to becoming entrenched in the practices of traditional financial players. This sentiment is also shared by Société Générale and its subsidiary SG-Forge, and by Goldman Sach.

Interviewed by ReutersMathew McDermott, head of digital assets at the US investment bank, anticipates a significant increase in the trading volume of these assets over the next 1-2 years.

Bitcoin and ETFs revive institutional appetite

To support this scenario, the executive points in particular to growing client interest in crypto derivatives. In particular, McDermott cites Bitcoin spot ETFs, which are awaiting SEC approval.

Bitcoin is up over 50% this quarter. The ETF effect has rekindled interest among institutional clients, particularly hedge funds and asset managers. However, the ETF hypothesis needs to be converted into reality.

However, like Goldman Sach, traditional finance is also looking beyond crypto assets and thus in the direction of tokenization of regulated financial products in the form of security tokens shares, bonds, etc.

Huge appetite for security tokens

For Mathew McDermott, this is where the priority lies in terms of digital asset development. According to him, these tokens are generating a “huge appetite”. And this has “increased significantly” over the last 12 months.

But to develop this token offering and globalize the market, a “major overhaul of the technological infrastructure underpinning financial markets” is required.

This technological evolution through the deployment of blockchain solutions is presented as the means to achieve substantial operational gains in transaction processing. Blockchain is also an instrument for “derisking” financial markets.

3 to 5 years for consistent trading

Trading securities through blockchain would thus result in gains in collateral and liquidity, which “could be exchanged between parties more quickly and accurately”.

Time is needed, however, to bring together the preconditions for tokenization at scale, moderates Mathew McDermott. We still lack, among other things, a secondary market and industrialized processes.

Within the next one to two years, we’ll probably see a significant increase in the volume of on-chain exchanges, but it will probably take three to five years for these marketplaces to reach any kind of scale,” says McDermott.

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