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- According to three people familiar with the plans, Goldman Sachs is one of a handful of tier-one US banks finding out how to utilize bitcoin as collateral for cash loans to institutions
- According to the news, it’s an opportunity that will pave the way for more integrated crypto prime brokerage services in the future
- A second source from a prominent institutional trading business added They have probably spoken to half a dozen big banks about. Some are within the next three to six months, while others are further off
According to three people familiar with the plans, Goldman Sachs is one of a handful of tier-one US banks finding out how to utilize bitcoin as collateral for cash loans to institutions. Banks like Goldman Sachs will avoid bitcoin spot markets in favor of synthetic crypto products like futures. Banks are studying methods to follow the same route of not handling bitcoin, like other synthetic goods, by emulating tri-party repo-type agreements.
According to news, it’s an opportunity that will pave the way for more integrated crypto prime brokerage services in the future. It’s also a continuation of Wall Street’s surprising adoption of a $2.7 trillion asset class although with very narrow products. One of the persons added Goldman was working on obtaining approval for lending against collateral and tri-party repo. And if they used a liquidation agency, they were just performing secured financing and never had bitcoin on their balance sheet. A few large banks are following in the footsteps of crypto-friendly banks Silvergate and Signature, which both offered bitcoin-backed cash loans earlier this year.
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A second source from a prominent institutional trading business added They have probably spoken to half a dozen big banks about. Some are within the next three to six months, while others are further off. It’s worth noting that some of these institutions will make the loan on their own balance sheet. This will be syndicated by others. Banks were granted a partial green light to take bitcoin as collateral during the last US administration when Office of the Comptroller of the Currency head Brian Brooks claimed bitcoin was the equivalent of cash and banks could be its safe-keepers.
The regulatory environment in the United States, on the other hand, remains difficult. Regulation might come from the OCC, the Securities and Exchange Commission, or the Commodity Futures Trading Commission, depending on the bank and what is being proposed. Coinbase and Fidelity Digital Assets were mentioned as possible custodians with whom the banks were in talks. Coinbase did not respond to a request for comment. Requests for comment were not returned by Fidelity Digital Assets. A slew of smaller lenders, in addition to the large banks, are thought to be looking at methods to accept bitcoin as collateral. In this tri-party lending space, non-bulge-bracket banks are also expanding, a third source stated.
Andrew is a blockchain developer who developed his interest in cryptocurrencies while pursuing his post-graduation major in blockchain development. He is a keen observer of details and shares his passion for writing, along with coding. His backend knowledge about blockchain helps him give a unique perspective to his writing skills, and a reliable craft at explaining the concepts such as blockchain programming, languages and token minting. He also frequently shares technical details and performance indicators of ICOs and IDOs.
