Goldman Sachs starts to offer Bitcoin-backed loans

    30 Apr 2022

    Goldman Sachs offered its first-ever lending facility backed by Bitcoin, a significant step for a major U.S. bank that shows an increased interest in crypto from traditional financial institutions. It allows crypto owners to receive fiat by using their crypto assets as collateral, which is the first case for Wall Street banks.

    According to Bloomberg, banking and investment giant Goldman Sachs has issued its first cash loan secured by cryptocurrency, signaling the entry of a traditional financial institution into a field that has generally been the purview of decentralized finance (DeFi).

    Goldman’s loan was backed by Bitcoin, and while the details were not revealed, the firm said that the “interesting piece for us was the structure and the 24-7-365-day risk management.”

    The loan differs from DeFi lending in several notable ways. For one thing, Goldman gave the borrower fiat currency rather than dollar-pegged stablecoins used by DeFi lending protocols like Maker, Aave, and Compound, which offer stablecoin loans backed by 125% to 150% crypto collateral locked into smart contracts.

    For another, the whole purpose of cryptocurrencies from Bitcoin on was to eliminate the middlemen from financial transactions — the opposite of borrowing money from Goldman Sachs bank.

    Like other firms in the traditional finance space, the banking giant has been making strides into the crypto world recently.

    Last month, Goldman offered its first-ever over-the-counter crypto transaction in the form of a Bitcoin non-deliverable option and a recent report said that it was gearing up to offer over-the-counter ETH options.

    The company is also reportedly looking to strengthen ties to FTX, as the exchange giant navigates US regulations. It participated in a funding round for blockchain security firm CertiK.

    The latest move is not the first sign that firms in the traditional finance space are getting over their wariness of crypto.

    Banks like JPMorgan and Citibank are offering some clients crypto investment products. Blackrock this year has revealed plans to offer crypto trading services and just this week launched an exchange-traded fund focused on blockchain- and crypto-focused firms like Coinbase.

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