(2 May 2022 – United States) Goldman Sachs has issued its first bitcoin (BTC) backed loan to a borrower.
The global investment bank major permitted a customer to receive a cash loan backed by BTC as collateral for the first time with the loan was by the secured lending facility of the bank.
The loan is viewed as a crucial step toward broad scale adoption of cryptocurrencies by Wall Street. Crypto-backed loans are becoming more ubiquitous in DeFi, but traditional institutions see crypto-backed loans as an alternative method to access increased capital.
Loans of this type can be riskier than regular asset-backed loans given BTC’s underlying volatility. If the BTC price declines too far the borrower may have to increase collateral to avoid being liquidated.
“We recently extended a secured lending facility where we lent fiat collateralized on BTC with BTC being owned by the borrower. The interesting piece for us was the structure and the 24-7-365 day risk management” a Goldman Sachs spokesperson stated.