NFTs are financial instruments that can be used to represent ownership of digital assets. Unlike traditional financial instruments, which are typically backed by fiat currency or commodities, NFTs are backed by blockchain technology. This allows them to be stored and transferred digitally, without the need for a central authority. As a result, NFTs have the potential to revolutionize the way we trade and interact with digital assets. For example, they could be used to create decentralized exchanges, where users can buy and sell digital assets without having to trust a third party. In addition, NFTs could also be used to create new types of financial instruments, such as smart contracts or tokenized securities.
Already offering bitcoin derivatives to its customers, Goldman Sachs said during a presentation at the Financial Times Crypto and Digital Assets Summit that it was also evaluating NFTs as financial instruments. This is in itself uninteresting, as all of the largest financial institutions should be developing plans around NFTs. These plans need to recognize the weaknesses of the current NFT platforms, determine how it will utilize NFTs, and then use its brand and regulatory chops to steer appropriate 3rd parties to address those bank-related issues and deliver a product the bank can offer to its clients. Those products will differ significantly depending on many factors, but most fundamentally the product will either target retail bank customers, commercial clients, or investors:
“Goldman Sachs said it is examining non-fungible tokens (NFTs) and particularly the “tokenization of real assets,” as the investment bank dives deeper into the crypto space.
• The metaverse where real world assets like real estate are bought and sold as NFTs has been garnering the attention of big names in financial services and a range of other industries.
• “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,” Mathew McDermott, global head of digital assets at Goldman Sachs, said at the Financial Times Crypto and Digital Assets Summit on Wednesday.”
Overview by Tim Sloane, VP, Payments Innovation at Mercator Advisory Group
