Goldman Sachs Offers Its First Bitcoin-Backed Loan
The move is a significant step for the investment bank as Wall Street continues to embrace digital assets. According to a spokesperson for the bank, the secured lending facility loaned cash collateralized by BTC held by the borrower.
The deal was interesting to Goldman because of its structure and 24-hour risk management, they added according to Bloomberg.
The arrangement allows crypto owners to receive fiat such as USD by using their crypto as collateral, but it is a first for the Wall Street bank.
Big Banks Warming to Crypto
The move is another sign that big banks are embracing crypto and broadening their services to incorporate clients with digital asset investments. Goldman already has a crypto assets team and traded its first-ever over-the-counter (OTC) Bitcoin options in March, becoming the first major U.S. bank to do so, the report added.
Earlier this month, Goldman announced that it planned to add to that offering with OTC Ethereum options. Analysts at the bank have cited Ethereum’s upcoming ‘Merge’ and upgrade to proof-of-stake as being bullish for demand for the asset.
According to the global head of digital assets for Goldman Sachs’ private wealth management division, Mary Rich, the bank wants to follow Morgan Stanley by offering crypto investments for its private equity clients.
The big banks are following in the footsteps of more specialized firms such as Jefferies Financial Group, which is expanding banking services for crypto clients. BlackRock also invested heavily recently by contributing to a $400 million funding round for stablecoin issuer Circle.
Damien Vanderwilt, co-president of Galaxy Digital Holdings, commented that accepting crypto assets as collateral is the next step beyond services such as wealth management, trading, and investment banking for Wall Street banks. Crypto-centric banks such as Silvergate Capital already provide loans for crypto collateral.
Goldman Sachs Foray Into Crypto
The Wall Street behemoth was anything but optimistic in regards to the cryptocurrency industry up until a year ago. It went from having a digital asset trading platform to halting it years later while also bashing BTC in the meantime.
In one particular case from May 2020, the bank said bitcoin is not an asset class. Some months down the line, though, Goldman started changing its tune by hiring a crypto research team, publishing several bullish reports, predicting a $100K price tag for BTC, participating in funding rounds, and, perhaps most notably, filing for a bitcoin ETF.Source