Top-Tier U.S. Banks Like Goldman Sachs and Others Exploring Bitcoin-backed Loans
As per the latest reports some of the handful of top-tier U.S. Banks including the likes of Goldman Sachs are figuring out ways to use Bitcoin as collaterals against cash loans to institutions.
As per sources familiar with the matter, banks such as Goldman Sachs won’t be leaning towards the cryptocurrency spot market but will rather make the use of derivative Bitcoin products like the Bitcoin futures.
Sources familiar with the matter also told the CoinDesk publication that the opportunity lays the groundwork for an integrated crypto prime brokerage services in the future. One of the sources said: “Goldman was working on getting approved for lending against collateral and tri-party repo. And if they had a liquidation agent, then they were just doing secured lending without ever having bitcoin touch their balance sheet.”
However, this is not the first time that banks are considering Bitcoin-backed loans for their high profile customers. Crypto-friendly banks like Silvergate and Signature have already announced similar products earlier.
Interestingly, Goldman is not the only Wall Street giant considering Bitcoin-backed loans. A handful of other banks are following the trail. Another source familiar with the matter said: “We’ve probably spoken to half a dozen big banks about [bitcoin-backed loans],. Some of them are in the next three to six months category and some are further out. What’s interesting is some of these banks will use their own balance sheet to make the loan. Others will syndicate this out.”
Even regulators have shown some affinity towards the idea of offering Bitcoin-backed loans. During the previous U.S. administration before Joe Biden, the then OCC chief Brian Brooks had noted that Bitcoin could be considered as equivalent of cash and banks could work as safe keepers for it.
In the recent developments, banks are not alone for on this path. They will be working together with some established players in the crypto space for e.g. Coinbase and Fidelity Digital Assets will serve as the potential custodians of the bank. However, neither of these two players have commented on this matter.
Apart from crypto firms, the U.S. banks have also shown deep interest in offering crypto custodial services for their institutional clients. In October, America’s fifth-largest retail bank - U.S. Bank - reported about the same.
“Our clients are getting very serious about the potential of cryptocurrency as a diversified asset class. I don’t believe there’s a single asset manager that isn’t thinking about it right now,” said the bank.
In his recent comments, the SEC chairman also said that Bitcoin is emerging as a strong competition to the U.S. Banking system.