With the rising popularity of cryptocurrencies such as Bitcoin (BTC) and Ethereum (ETH), traditional banks have started offering crypto-related services in response to rising demand. A global banking giant just set a major milestone by granting a credit facility backed by crypto, the first of its kind granted by the Wall Street financial institution.
Investment bank Goldman Sachs has just offered its first loan backed by Bitcoin, Cointelegraph reported. The move is viewed as a sign of Wall Street’moving further into crypto.
“We recently extended a secured lending facility where we lent fiat collateralized on BTC; BTC being owned by the borrower,” a Goldman spokeswoman told CoinDesk. “The interesting piece for us was the structure and the 24-7-365 day risk management.”
Goldman Sach’s new secured lending facility allows crypto owners to borrow fiat currency such as the U.S. dollar by using their Bitcoin (BTC) as collateral. However, the volatility of Bitcoin’s price can make these loans risky for the bank and the borrower may be required to increase their collateral if BTC’s price drops too far.
Goldman Sachs executed its first over-the-counter Bitcoin options trade last month in collaboration with Galaxy Digital. The bank has its own in-house digital assets team to handle crypto transactions.
Goldman isn’t the only traditional finance giant to move deeper into crypto. New York-based investment bank and financial services firm Cowen just launched a digital assets unit last month.
Earlier this month, BlackRock, the world's largest asset manager with US$10 trillion in assets under management, participated in a funding round for Circle, the creator of the stablecoin USDC. On Wednesday, the company announced the launch of a blockchain-focused exchange-traded fund (ETF).
On Thursday, private equity investment giant Apollo Global hired Christine Moy to become its first head of digital assets strategy. Moy is a former executive of JPMorgan.