Two years ago Goldman Sachs launched its Digital Assets Platform (GS DAP) with the issuance of a €100 million digital bond for the European Investment Bank (EIB). Goldman’s Head of Digital Assets, Mathew McDermott, said it is looking to spin out the solution in the next 12-18 months so that it can be industry owned, according to Bloomberg. That’s subject to regulatory approvals. It plans to retain its digital asset team.
While the initial use case is fixed income, he also envisages the platform being used for tokenized funds and collateral.
“We view permissioned distributed technologies as the next structural change to financial markets and are already demonstrating the meaningfulness of the technology’s perceived benefits”, said McDermott in a statement. “Delivering a distributed technology solution to a wide cross-section of financial market participants has the potential to redefine market connectivity, infrastructure composability, and to deliver a new suite of commercial opportunities for the buy- and sell-side.”
Tradeweb Markets, the major over the counter marketplace for bonds is planning to partner with Goldman to launch new commercial use cases on the platform, bringing its trading and liquidity expertise. Earlier this year, Tradeweb announced plans to work with blockchain startup Alphaledger to develop fixed income solutions. Tradeweb also invested in Securitize, BlackRock’s tokenization partner.
So far several banks have launched their own private blockchains, which has led to fragmentation and a pressing need for interoperability. Blockchains are meant to address the current siloed nature of banking. The efficiencies and business model benefits are achieved when many institutions use the same shared blockchain. That’s why the Bank for International Settlements (BIS) has been promoting the idea of a ‘Unified Ledger’.
While Goldman has participated in transactions on other platforms and previously said it is planning more tokenized issuances, so far it has executed two on GS DAP – the digital EIB bond and Hong Kong’s first tokenized green bond issuance. It’s not alone, with many bank-owned platforms only involved in occasional issuances.
Digital bond issuances on other platforms
HSBC’s Orion has performed a little better with two EIB issuances, and one for Hong Kong, plus more of its own. HSBC Orion uses the same core technology as GS DAP, Digital Asset’s Canton, but also combines it with Hyperledger Fabric.
Two German platforms have produced larger volumes. Deutsche Börse’s Clearstream has the centralized D7 issuance platform that has been involved in €10 billion in issuances, including two large digital bonds issued by KfW that totaled €8 billion. One of Clearstream’s clients has issued tens of thousands of structured products using the platform. SWIAT was founded by DekaBank and is also backed by LBBW and Standard Chartered. It now has more than 20 institutional participants.
Update: added a quote following the release of a Goldman Sachs statement on the topic. An earlier version incorrectly stated that GS DAP was used for one issuance, rather than two.
