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Goldman to Launch its own Cryptocurrency; Files Patent

Wall Street firms’ increasing focus on digital currency technology has been reiterated yet again with the latest development from The Goldman Sachs Group, Inc. GS. The New York- based brokerage giant has filed a patent application with the US Patent & Trademark Office (USPTO) – Cryptographic Currency For Securities Settlement – for a new cryptocurrency called SETLcoin.

According to the patent application that was published recently, executives Paul Walker and Phil J. Venables have been named as inventors of the system.

As a digital medium of exchange, a cryptographic currency allows distributed, fast, secure, confirmed transactions for goods and services. While Bitcoin was one of the first cryptographic currencies that caught attention in 2009, several other cryptographic currencies are currently available including Novacoin, Namecoin, Feathercoin, and Dogecoin.

The patent application revealed that Goldman’s technology offers a virtual multi-asset wallet representing traditional securities and cash account for an individual, investor, or trader. The wallet has technology to generate, control, and store SETLcoins, for the purpose of exchanging assets such as stocks, bonds and cash or cash equivalents through peer-to-peer network.

Usually a trader trades securities by meeting at an exchange with cash for security and then the related settlement between parties occurs after much delay, sometimes after several days since the transaction.  Further, the trader bears all the associated credit risk within that period.

However, Goldman’s technology facilitates settlement at a much faster pace and minimizes risk. The application filing mentioned “settlements are nearly instantaneous because cryptographic currency transactions are independently and extemporaneously generated, verified, and executed within the network, without the risks associated with traditional clearing houses that can delay settlements for several days.”

Cryptocurrency Buzz

Goldman’s latest venture further adds to its initiatives related to cryptocurrencies. Notably, in April Goldman Sachs along with China-based IDG Capital Partners led a $50 million strategic investment in Bitcoin startup – Circle Internet Financial Ltd.

Further, a group of top investment banks including Goldman, JPMorgan Chase & Co. JPM, Credit Suisse Group AG and Barclays PLC BCS is working with New York-based financial tech firm R3 to develop a framework for using blockchain technology in the global finance markets.

Blockchain, the “digital ledger” or the underlying technology behind Bitcoin, has  gained attraction for its significant potential to revamp the extensive and complex network of bank payments as well as settlements.

Notably, in September, Bank of America Corporation BAC filed a patent with the USPTO for a system of wire transfers by using cryptocurrency.

Bottom Line

As banks are embracing technology, they are continuously looking out for ways and working with FinTech to restructure many daily operations, update back-office functions and making huge investments for auto execution of transactions. Further, in this competitive environment, the financial institutions are striving hard to attract and retain clients by offering better digital experience as traditional methods are gradually taking a backseat.

Goldman currently carries a Zacks Rank #3 (Hold).

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