In the latest hint that Wall Street is pushing farther into crypto, Goldman Sachs has offered its first bitcoin-backed loan.
Goldman Sachs Makes History
In order to aid to the institutional adoption of cryptocurrencies, Goldman Sachs has granted its first ever Bitcoin-backed loan. According to Bloomberg, the unnamed borrower received cash from the US-based investment bank, which was backed by Bitcoin, the world’s oldest cryptocurrency.
According to a Bloomberg representative, the loan includes 24-hour risk management. Because of the underlying volatility of BTC, such a loan falls under the risky category.
This move by Goldman Sachs demonstrates its commitment to the cryptocurrency sector, which the bank has been studying in detail.
A Bitcoin-backed loan allows the owner of the asset to borrow fiat currency such as rupees or dollars in exchange for their BTC.
Bitcoin’s value is liable to loss at any time due to its volatility. In this case, the borrower may be asked to provide additional collateral to protect their assets from being liquidated.
The move is another another indicator that big banks are warming to crypto and expanding their services to include clients who invest in digital assets.
According to Mary Rich, Goldman Sachs’ global director of digital assets for private wealth management, the bank wants to follow Morgan Stanley and provide crypto investments to its private equity clients.
Goldman Sachs said earlier this month that it would be expanding its Ethereum offering with OTC options. Ethereum’s imminent ‘Merge’ and upgrade to proof-of-stake, according to analysts at the bank, will boost demand for the commodity.
Last month, Goldman Sachs, which now has its own digital assets team, completed its first over-the-counter crypto transaction in partnership with Galaxy Digital, Michael Novogratz’s crypto investment firm.
Sachs Isn’t Alone
Goldman Sachs isn’t alone in its venture into digital assets; other Wall Street firms are also stepping up their efforts in the cryptocurrency space.
BlackRock Inc. joined a $400 million fundraising round in stablecoin provider Circle, while Jefferies Financial Group is extending banking services for crypto clients.
According to Bloomberg, boutique investment bank Cowen Inc. launched a digital assets arm in March 2022.
Earlier on Thursday, it was announced that Apollo Global Management had hired Christine Moy, a former JPMorgan (JPM) executive, as the company’s first head of digital assets strategy.
BTC/USD trades below $40k. Source: TradingView
Accepting crypto assets as collateral, according to Damien Vanderwilt, co-president of Galaxy Digital Holdings, is the next step beyond services like wealth management, trading, and investment banking for Wall Street banks.
Silvergate Capital, a crypto-focused bank, already offers crypto collateral loans.
There is no information on the interest rates that Goldman would charge for Bitcoin loans, although the commission is expected to be minimal.
If the Bitcoin project succeeds, the national bank may consider adding other tokens to its list of loans.
However, rather than spot crypto trading, the bank currently provides access to crypto ETFs (Exchange Trader Funds) and options trading. Rather than holding tokens themselves, institutional traders prefer to invest in cryptocurrencies through an intermediary.
Featured image from Getty Images, chart from TradingView.com