Goldman Sachs unveils crypto classification system, aimed at institutional investors

Goldman Sachs makes an effort to standardize the way the financial industry talks about, tracks and invests in the burgeoning universe of digital assets.

The investment bank is set to unveil a data service created with global index provider MSCI and crypto data firm Coin Metrics is seeking to classify hundreds of digital coins and tokens so that institutional investors can understand the new asset class, according to executives at the three firms.

“The digital asset ecosystem has really expanded over the last couple of years,” Anne Marie Darling, head of client strategy for Goldman’s Marquee platform, said in an interview. “We’re trying to create a framework for the digital asset ecosystem that our customers can understand, because they increasingly need to think about performance tracking and risk management in digital assets.”

Crypto assets exploded in value during the pandemic, reaching $3 trillion in total value last year, before joining other risky assets as the Federal Reserve raised interest rates.

While skeptics included JPMorgan Chase CEO Jamie Dimon and Berkshire Hathaway CEO Warren Buffett has mocked bitcoin, industry supporters say the cryptocurrency’s recent run with lower volatility compared to traditional investments shows it is maturing as an asset class.

The new service is called Datonomy – a play on the word taxonomy, which is the branch of science concerned with naming and classifying the natural world – and can be accessed as a subscription-based data feed or through Marquee, which is Goldman’s digital storefront for institutional investors.

The three companies have divided the digital asset world into classes, sectors and sub-sectors, depending on how the tokens or coins are used, Darling said.

Doing so will allow money managers at hedge funds and asset management companies to be able to think about crypto in a more granular way, similar to how stocks might be discussed like industry sectors or topics like growth versus value stocks, she said.

Users can tap into the data stream to help with analysis and research, as well as performance benchmarking, manage portfolios or create investment products based on sectors including decentralized finance, metaverse, smart contract platforms or value transfer coins.

Major asset managers have called for an “adult framework” to better understand digital assets and discuss it in a consistent way, according to Coin Metrics CEO Tim Rice.

“We’ve organized it in an intuitive way that should help asset managers get into this asset class in a much more standardized way,” Rice said. “This is the next phase of getting the foundation of the industry aligned so that everyone can embrace it and we can figure out what the next direction move in the market is.”