Goldman Sachs Introduces First-Ever Bitcoin-Backed Loan As Wall Street Adopts Crypto
In a significant move toward institutional adoption of cryptocurrency on Wall Street, the famous international investment bank Goldman Sachs introduced its first BTC-backed loan to customers.
In an interview with Bloomberg, the spokeswoman for Goldman Sachs revealed that the investment bank has given out a collateralized loan backed by Bitcoin for the first time in the investment bank’s history. The spokeswoman added that the deal is attractive, going by the structure and risk management, covering 24 hours.
Here, the Bitcoin holders, the borrowers, are allowed to borrow any preferred fiat currency by tendering their BTC to the bank as collateral. However, the volatility associated with Bitcoin is said to make such loans risky.
Meanwhile, should the price of Bitcoin drop further, borrowers are required to increase their collateral to be commensurate with the value of the fiat currency. If the borrower fails to do so, the risk can be liquidated.
Goldman Sachs Crypto Move
The investment bank also has its own in-house digital assets unit where experts are assembled to drive its digital asset policy. Last month, the banking behemoth, collaborating with Galaxy Digital, performed its first crypto transaction.
Fellow Wall Street banks are also reported to have begun making inroads into the digital assets space, which is quickly becoming an attractive alternative source of finance for traditional banking players.
BlackRock, the trillion-dollar asset management company, recently announced its launch of a blockchain-centered exchange-traded fund (ETF). In the early days of April, the firm also disclosed its partnership with Circle and its involvement in a funding phase estimated to be $400 million. The Circle partner is the custodian of the USD stablecoin, USDC.
Crypto Fast Becoming a Collateral for Loans
Crypto-backed loans have been a mainstay in the decentralized finance space for quite some time. It is now becoming an option for most financial institutions and governments looking to explore alternative ways of gaining access to capital.
There have been a series of partnerships between established traditional financial service providers and crypto service providers. Moreover, other sectors of the conventional economy are also among those looking to explore using cryptocurrency to boost their services.
A blockchain real estate company, Propy, recently announced a partnership with a crypto loan firm, Abra, to provide its customers with access to home loans using crypto holdings as collateral to access such loans.
It is reported that a homeowner recently purchased a new apartment in Austin, Texas, via a platform named USDC.homes. The deposit was a stake in digital currency, with the mortgage also collateralized based on the credit score of the interested applicant. Due to some needed criteria, not every application will be addressed.
El Salvador is currently working on a deal to secure funds for its new crypto-backed projects. The new bond is a Bitcoin-backed bond approved by the government that will be utilized to acquire funding for the proposed Bitcoin City and expand the country’s Bitcoin reserves.
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