Goldman has reportedly offered its first ever lending facility backed by BTC as the Wall Street giant deepens its Bitcoin offerings.

The arrangement, made popular over the past few years in the Bitcoin industry by newer companies, enables a bitcoin holder to obtain fiat money like U.S. dollars by putting up their BTC as collateral to the bank. If the price of bitcoin drops, the user may be required to increase their collateral, risking getting liquidated in case they fail to do so.

The Wall Street giant lent cash collateralized by bitcoin owned by the borrower for the first time, a spokeswoman for the bank told Bloomberg. The deal was interesting to Goldman because of its structure and 24-hour risk management, she told the publication in an email.

Surge in Crypto Price & Popularity Chipping Away Resistance

After years of resistance, the surge in price and popularity of crypto have been making Wall Street banks ramp up their crypto offerings.

Besides Goldman Sachs, other investment banks have been taking steps toward crypto.

Jefferies Financial Group is expanding banking services for crypto clients, while BlackRock Inc. has joined a $400 million funding round in stablecoin firm Circle this month. Boutique investment bank Cowen Inc. too, started a digital assets unit in March 2022, as per Bloomberg.

So with Goldman not being alone in its foray into digital assets, it’s fair to say that crypto adoption is gradually pacing up amid Wall Street banks, with some other banks also ramping up their movements into the cryptocurrency space.

While overcollateralized crypto-backed loans have been a staple in the world of decentralized finance (DeFi) for some time, the crypto-collateralized loan is becoming an alternative method for institutions and governments looking to gain increased access to capital.

Wall Street Giants Dip Toes in Crypto

Meanwhile, several other major banking firms in the U.S. have also been offering crypto-related services to their clients. The increased demand by customers for these products has led to the adoption of crypto by the institutions.

In March 2021, American multinational investment bank Morgan Stanley revealed via an internal memo that it would be offering three Bitcoin funds to its wealthy investors.

Five months later, JPMorgan Chase joined the bandwagon and started offering its clients access to six crypto funds created by digital asset firm New York Digital Investment Group (NYDIG).

Goldman’s entrance into the bitcoin-backed loan business represents a watershed moment for the industry in terms of liquidity, legitimacy and optionality available for consumers.



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by Styliana Charalambous Head of Market Research
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