Global investment bank and financial services company Goldman Sachs has offered its first-ever Bitcoin (BTC)-backed loan, accelerating the adoption of cryptocurrency on Wall Street, Bloomberg reported on 28 April.
The publication cited a spokesperson for Goldman Sachs, who said the bank’s security lending facility had approved a customer to use BTC as collateral for a cash loan, the first in Goldman Sachs’ history. She also noted that the deal was of particular interest because of its unique structure and 24/7 risk management.
The main risk when using BTC as collateral to borrow fiat comes from the volatility of the crypto asset. If, for an example, the price of BTC drops too far the bank can request that the borrower increase their collateral, otherwise he runs the risk of getting liquidated.
The Wall Street bank has been moving further into the crypto space for some time now, with its own in-house digital assets team completing its first over-the-counter BTC options transaction with Galaxy Digital last month. While it was not the first bank to offer BTC-backed loans — with crypto friendly Silvergate Capital providing this service since last year — Goldman Sachs’ move is a major step for institutional crypto adoption on Wall Street.
Other Wall Street firms have also started ramping-up their involvement with the crypto space. BlackRock, for example, revealed the launch of a blockchain-focused exchange traded fund (ETF) earlier this week, and also participated in a $400 million funding round for Circle, the operator of the USDC stablecoin, last month. On Saturday, investment bank Cowen also announced a new digital asset unit, which will offer full-service trade execution and custody solutions to its institutional clients.