Goldman Sachs Launches Its First Bitcoin-Backed Loan

April 29, 2022 10:39 pm

The prominent investment bank just announced that it will be launching its first Bitcoin-backed loan which further indicates that the firm is getting more and more involved with crypto.

Essentially, the firm is allowing customers the ability to use  Bitcoin as collateral for a cash loan which is a sign that digital assets are continuing to gain value as an alternative asset.

The deal is done through a specific lending facility and the loan will be monitored by a specific risk management team making the structure of these loans very unique.

This is not the first time that Goldman has gotten involved in the digital assets industry as it had previously traded over the counter bitcoin options with the Galaxy Digital fund before.

CoinDesk reports:

Goldman’s secured lending facility allowed a borrower to use bitcoin (BTC) as collateral for a cash loan.

Goldman is following in the footsteps of other traditional finance giants moving further into crypto.

Last month, Cowen launched a digital assets unit and BlackRock (BLK) participated in the $400 million funding round for USDC stablecoin creator Circle.

Earlier Thursday, news broke that private equity investment behemoth Apollo Global Management had hired former JPMorgan (JPM) executive Christine Moy to serve as its first head of digital assets strategy.

This recent move by the investment bank follows a new trend within the financial services industry where firms are increasingly allowing borrowers to use crypto as collateral for a loan.

Although the underlying value of digital assets like Bitcoin could be considered risky for some, it allows borrowers to retain their crypto assets and also increase their collateral if needed in order to maintain the loan deal.

Crypto-collateralized loans are already commonplace in the DeFi world, but to see government and large financial institutions get into space will completely change the financial landscape.

As a result, the amount of capital that crypto holders can now access increases dramatically and the entire loan industry will all of a sudden have exposure to the crypto markets.

CoinTelegraph reports:

Yesterday, blockchain real estate platform Propy announced a partnership with Abra to offer its customers access to home loans using cryptocurrency holdings as collateral.

On Wednesday, a new homeowner purchased an apartment in Austin, Texas, using a platform called USDC.homes.

The deposit was staked crypto, and the mortgage was undercollateralized and based on the applicants’ credit score.

El Salvador is currently in the process of securing finances for its volcano bond; a Bitcoin-backed government bond that will be used to amass $1 billion in funding for the development of Bitcoin City and to increase the size of the country’s BTC reserves.

The long term effects that this will have on the economy is still unknown as the health of the mortgages and loans industries often an indication of overall economic health, but it can be certain that this will drive up the demand for crypto.

Join the conversation!

We have no tolerance for comments containing violence, racism, profanity, vulgarity, doxing, or discourteous behavior. If a comment is spam, instead of replying to it please click the icon below and to the right of that comment. Thank you for partnering with us to maintain fruitful conversation.