Goldman Sachs’ first Bitcoin-backed loan has been offered, marking a significant step in institutional cryptocurrency adoption on Wall St.
Bloomberg was told by a Goldman spokeswoman that Bitcoin (BTC), a digital currency owned by the borrower, had been used as collateral for cash. This was the first time this has happened in the history of Goldman Sachs. She said that the structure of the deal and 24-hour risk management made it particularly fascinating.
This loan allows a Bitcoin holder, who has their BTC as collateral, to borrow fiat currency like the US dollar. These loans can be risky due to the volatility of Bitcoin. If the price drops too much, the borrower might need to increase their collateral or risk being liquidated.
Goldman, now with its own digital assets team, executed last month their first over-the counter (OTC) cryptocurrency transaction in collaboration avec the trading unit at Michael Novogratz’s crypto investment firm Galaxy Digital.
Goldman isn’t the only Wall Street bank to venture into digital assets. Wall St banks are also expanding their efforts into this space.
BlackRock, a multi-trillion-dollar asset management company, announced Wednesday the launch of a blockchain-focused ETF. The firm also announced earlier this month its participation in a $400M financing round and partnership with Circle. Circle is the main operator of the USDC stablecoin.
While overcollateralized crypto-backed loans have been a staple in the world of decentralized finance (DeFi) for some time — the crypto-collateralized loan is becoming an alternative method for institutions and governments looking to gain increased access to capital.
Related: Home sweethodl: How a bitcoiner used BTC for his mom’s purchase of a house
Yesterday, Propy, a blockchain-based real estate platform, announced a partnership to Abra to provide its customers with home loans that use cryptocurrency holdings as collateral. A platform called USDC.homes helped a homeowner purchase an apartment in Austin, Texas. The mortgage was secured crypto and the deposit was staked crypto.
El Salvador is currently securing financing for its volcano bond. This Bitcoin-backed government bond will be used to raise $1 billion for “Bitcoin City”, and increase the country’s Bitcoin reserves.
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