(Reuters) - Goldman Sachs Group Inc (GS.N) is ditching plans to open a desk for trading cryptocurrencies as the regulatory framework for crypto remains unclear, Business Insider reported on Wednesday, citing people familiar with the matter.
In recent weeks, Goldman executives have concluded that many steps still need to be taken, most of them outside the bank’s control, before a regulated bank would be allowed to trade cryptocurrencies, the financial news website reported.
“At this point, we have not reached a conclusion on the scope of our digital asset offering,” Goldman Sachs spokesperson Michael DuVally told Reuters.
Major cryptocurrencies plunged on the news. Bitcoin BTC=BTSP fell nearly 5 percent to touch five-day low at $6,985 on the Luxembourg-based Bitstamp exchange. Ethereum slid 9 percent, Litecoin 7.1 percent and Ripple 7.7 percent.
In October, Goldman Chief Executive Lloyd Blankfein had tweeted, “Still thinking about Bitcoin. No conclusion - not endorsing/rejecting. Know that folks also were skeptical when paper money displaced gold.”
Blankfein’s tweet was in sharp contrast to comments made by JPMorgan Chase & Co (JPM.N) CEO Jamie Dimon, who called bitcoin a “fraud.” It is worse than tulips bulbs,” Dimon had said, referring to a famous market bubble from the 1600s.
Goldman’s rival Morgan Stanley (MS.N) had spoken in favor of the currency, with CEO James Gorman calling it “more than just a fad.”
The virtual currency can be used to move money around the world quickly and with relative anonymity, without the need for a central authority, such as a bank or government. A fund holding the currency could attract more investors and push its price higher.
Bitcoin had rocketed to a record high of $16,000 in December. Several small U.S. firms reshaped their business models to capitalize on the craze for blockchain technology, which supports cryptocurrency.
Beverage maker Long Island Iced Tea Corp’s LTEA.O shares jumped nearly 300 percent in late December after the company said it would rebrand itself Long Blockchain Corp.
However, regulators across the world have been intensifying their scrutiny of initial coin offerings (ICOs) and cryptocurrency exchanges.
Last year, the U.S. Securities and Exchange Commission warned that some of the coins issued in ICOs could be considered securities, implying that trading them would have to comply with federal securities laws.
Reporting by Diptendu Lahiri in Bengaluru; Editing by Maju Samuel and Arun Koyyur