Goldman Sachs experiments with Bitcoin-related products and services as it partners with Coinbase.
Bringing Crypto Mainstream
Goldman Sachs, one of the leading investment banks in the world, offers a Bitcoin-backed loan as it partners with Coinbase to tap into new liquidity. Borrowers can now obtain cash loans by collateralizing their Bitcoin. ,
Bloomberg News was the first to announce the inaugural move by a major US bank, further exposing institutional banking to the capabilities of crypto and blockchain tech. A Goldman Sachs spokeswoman addressed the development in an email to Coindesk, featured in an April 28 article by Brendy Betz:
“We recently extended a secured lending facility where we lent fiat collateralized on BTC; BTC being owned by the borrower. The interesting piece for us was the structure and the 24-7-365 day risk management.”
The bank’s foray into the crypto space and its willingness to recognize Bitcoin as collateral is a vote of confidence for the top crypto asset by market cap. In the past, banks and financial institutions were generally reluctant to recognize crypto assets as collateral for its loan because of the crypto asset’s inherent volatility.
Recognized Asset Class
Crypto assets are generally accepted as good collateral in Decentralized Finance (DeFi) protocols. The traditional institutions are slow to accept crypto assets as a form of security for its loan based on a few reasons.
First, crypto is a new asset class that has a market capitalization of $1.58 trillion. Compared to other more established asset classes, such as gold—which has a market capitalization of $11.799 trillion—the depth of liquidity is limited.
Secondly, crypto is regarded as a volatile asset, making it unsuitable to be used as security. Therefore the leap of faith by Goldman Sachs in recognizing Bitcoin as good collateral marks a major shift in perception.
Gearing Up for Change
Goldman Sachs has been embracing the change brought about by crypto assets. The bank has a dedicated digital assets team and traded its first over-the-counter (OTC) Bitcoin options to Galaxy Digital recently.
Other financial institutions are also preparing themselves by establishing their own digital asset unit. Blackrock, the global leader in investment, advisory, and risk management solutions, recently participated in a $400 million funding round for Circle, the creator of $USDC, the second-highest market capped stablecoin.
Source : bsc.news
Founded in 2020, BSCNews is the leading media platform covering decentralized finance (DeFi) on the Binance Smart Chain (BSC). We cover a wide range of blockchain news revolving mainly around the DeFi sector of the crypto markets. BSCNews aims to inform, educate and share information with the global investment community through our website, social media, newsletters, podcasts, research, and live ask me anything (AMA). Our content reaches hundreds of thousands of global investors who are active in the BSC DeFi space.