Goldman Sachs to Explore NFTs as Financial Instruments

American banking giant Goldman Sachs has praised non-fungible tokens (NFTs), claiming that they are “quite powerful” in the context of financial instruments. The bank also said that it is looking into tokenizing real-world assets. The statement comes as NFTs and the metaverse, two crypto buzzwords, have been garnering the attention of big names. 

Goldman Sachs and “Tokenization of Real Assets”

Goldman Sachs is reportedly examining the “tokenization of real assets” as the investment bank pushes deeper into the emerging crypto space. The bank has also acknowledged that NFTs have great potential, adding that they are exploring the blockchain-based innovation in the context of financial instruments. 

Mathew McDermott, global head of digital assets at Goldman Sachs, broke the news during the Financial Times Crypto and Digital Assets Summit on Wednesday, saying:

“We are actually exploring NFTs in the context of financial instruments, and actually there the power is actually quite powerful. So we work on a number of things.”

This is not the first time the banking giant has made positive statements with regard to crypto. More specifically, Goldman Sachs has made remarkably cheerful predictions about the metaverse, which is a futuristic digital world poised to simplify social connection. 

Earlier this year, Goldman Sachs analyst Eric Sheridan called the metaverse an $8 trillion market. Sheridan claimed that the digital economy is currently around 20% to 25% of the global economy, adding that it would continue to grow exponentially. He said:

“We see the digital economy continuing to grow, and on top of that we see a virtual economy that will grow within and alongside this digital economy. That’s how we came up with the number for various outcomes of anywhere from $2 trillion to $12 trillion, with $8 trillion at the midpoint of all potential outcomes.”

Goldman Sachs has traditionally been a crypto skeptic. However, the bank evolved to become the first crypto-friendly Wall Street giant and has even gotten involved with crypto in various ways. In May 2021, the bank opened an entire trading desk in order to provide some of its high-net-worth clients with exposure to Bitcoin.

Notably, the bank has also been very bullish on Ethereum, particularly since an entire ecosystem of decentralized apps has been built on the cryptocurrency. In a report, Goldman Sachs analysts even predicted ETH will surpass BTC in terms of price in the coming years. The bank also plans to begin offering Ether options to clients. 

NFTs in Context of Financial Instruments: What Could that Mean?

Financial instruments are contracts between parties that hold a monetary value. Some examples of financial instruments are cheques, shares, stocks, bonds, futures, and options contracts, all of which provide a somehow efficient flow and transfer of capital among investors. 

Therefore, the fact that Goldman Sachs is considering NFTs as financial instruments could, at the surface of it, suggest that NFTs hold monetary value and that they are not worthless “JPEGs.” Moreover, it also means that the major bank views NFTs as an efficient way of capital flow.

While these are some use cases obvious from the viewpoint of an investment bank, there is much more potential for NFTs. For instance, NFTs revolutionize the art industry by bringing a wide range of new possibilities, including royalties which enable artists to earn a percentage of the sale of their artworks whenever they are traded on a marketplace. 

What is your favorite use case for NFTs? Let us know in the comments below. 

About the author

Ruholamin Haqshanas is an accomplished crypto and finance journalist with over two years of experience writing in the field. He has a solid grasp of various segments of the FinTech space, including the decentralized iteration of financial systems (DeFi), and the emerging market for non-fungible tokens (NFTs). He is an active user of digital assets for remittances.