Goldman Sachs has offered its first Bitcoin-backed loan, inside a major advance for institutional cryptocurrency adoption on Wall St.
A spokeswoman from Goldman told Bloomberg the multinational investment bank had given cash collateralized by Bitcoin (BTC) of the customer the very first time in Goldman Sachs’ history. She added the deal was particularly interesting due to its structure and 24-hour risk management.
This type of loan enables for any Bitcoin holder to gain access to fiat currency like the US dollar, by fronting up their BTC as collateral towards the bank. The actual volatility of Bitcoin could make these financing options dangerous — when the cost of bitcoin drops too much the customer might be needed to improve their collateral, otherwise they risk getting liquidated.
Recently, Goldman, which now sports its own in-house digital assets team, performed their first over-the-counter (OTC) crypto transaction together with the buying and selling unit of Michael Novogratz’s crypto investment firm Universe Digital.
Goldman isn’t alone in the foray into digital assets, with fellow Wall St banks ramping up their movements in to the cryptocurrency space too.
On Wednesday multi-trillion dollar asset management firm BlackRock announced the launch of the blockchain-focused ETF. Earlier this year the firm also announced its participation inside a $400M funding round and partnership with Circle, the main operator from the USDC stablecoin.
While overcollateralized crypto-backed loans happen to be a staple in the realm of decentralized finance (DeFi) for a while — the crypto-collateralized loan has become an alternate way of institutions and governments searching to achieve elevated use of capital.
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Yesterday, blockchain property platform Propy announced a partnership with Abra to provide its customers use of mortgage loans using cryptocurrency holdings as collateral. On Wednesday, a new homeowner purchased a condo in Austin, Texas, utilizing a platform known as USDC.homes. The deposit was staked crypto, and also the mortgage was undercollateralized and in line with the applicants credit rating.
El Salvador is presently while securing finances because of its volcano bond a Bitcoin-backed government bond that’ll be accustomed to gather $1 billion in funding for the introduction of “Bitcoin City” and also to expand the country’s Bitcoin reserves.