In a recent interview, Mathew McDermott, the head of digital assets at Goldman Sachs, shared his thoughts with FOX Business on the future of digital assets and blockchain technology. McDermott highlighted the increasing involvement of traditional financial institutions in the digital assets space over the last 12 to 18 months. He attributed this trend to a growing recognition of the potential for digital assets to create efficiencies and reduce risks in business operations, aided by improved regulatory clarity worldwide.
McDermott emphasized that the digital assets market has reached a stage where the technology’s efficacy is broadly accepted, allowing the focus to shift to building out and scaling the technology. This development, he believes, is crucial for realizing the commercial value proposition of digital assets.
Looking ahead to 2024, McDermott anticipates significant advancements in tokenization and the development of marketplaces, particularly in the context of investor adoption. He expects the emergence of secondary liquidity on blockchain platforms to be a key driver of this trend. According to McDermott, this development will facilitate scale adoption, especially among buy-side investors.
Another area of growth McDermott foresees is in enhancing collateral mobility by addressing inefficiencies in the financial market’s infrastructure. He predicts that adopting blockchain technology will reveal immediate commercial benefits, including reduced risks and improved operational settlement.
McDermott also discussed the potential impact of the approval of spot exchange-traded funds (ETFs) for Bitcoin and Ethereum, which the Securities and Exchange Commission is currently considering. He believes that such approval could attract more institutional investors to the digital assets market, even if they do not directly invest in the underlying assets. This, he says, will broaden and deepen market liquidity by creating institutional products accessible to entities like pension funds and insurers:
“… it broadens and deepens the liquidity in the market. And why does it do that? It does that because you’re actually creating institutional products that can be traded by institutions that don’t need to touch the bare assets,” McDermott said. “And I think that, to me, that opens up the universe of the pensions, insurers, etc.“
While McDermott does not expect an immediate major change in the marketplace following the approval of spot cryptocurrency ETFs, he predicts a gradual increase in liquidity and interest in these products throughout the year. He also anticipates growth initially focused on more traditional asset classes, gradually expanding to more opaque asset classes later in the year and beyond:
“I think what you’ll see gradually and throughout the year, even if it’s approved, kind of first quarter, is a broadening and a deepening of the liquidity and those looking to trade the product. It is, as we all know, the highest performing asset class this year.“