Goldman joins the race to launch a crypto ETF

The news: The Wall Street bank’s asset management arm filed an application with the US Securities and Exchange Commission (SEC) to introduce an exchange-traded fund (ETF) focused on crypto-related companies, per Bloomberg.

More on this: The DeFi and Blockchain Equity ETF would track the Solactive Decentralized Finance and Blockchain Index, per the filing, investing at least 80% of its assets in companies that advance blockchain technology and digitize finance.

Goldman Sachs is getting involved in cryptos more broadly as well—it restarted its short-lived crypto trading desk that was closed in 2018 due to regulatory concerns and announced plans to offer options and futures trading in Ether, one of the largest cryptocurrencies.

Why now? Institutions are increasingly interested in crypto-related investments after seeing the windfalls crypto-related firms have taken in this year.

• Thirty-three percent of US institutional investors held digital assets as of April, up from 27% in March 2020, while 45% of family offices are interested in investing in crypto as well, according to a recent Goldman Sachs report. And crypto asset manager Grayscale reported in May that its AUM reached $52 billion after starting the year with just $20 billion.
• This year alone, crypto exchange Coinbase, which has 56 million users, went public at a $100 billion valuation while Circle announced a $4.5 billion SPAC listing. And crypto exchange Bullish, which isn’t even live yet, already agreed to a $9 billion SPAC. DeFi also has strong growth projections on its side: The industry grew from $2.39 billion in July 2020 to $63.96 billion at the time of writing.

The bigger picture: The SEC is reviewing more than a dozen crypto ETF applications and has delayed making any decisions. Chairman Gary Gensler in May called for more regulation for cryptocurrency exchanges and greater investor protections, which applicants will likely have to demonstrate to get approval.

It’s unclear when the first crypto ETF will launch, but experts believe it could be sooner rather than later—and banking behemoths like Goldman have decades of regulatory knowledge on their side to improve their shot at winning the crypto ETF race.