Goldman Sachs has historically issued its first ever Bitcoin-backed loan in order to contribute to the institutional adoption of cryptocurrencies. The US-based investment bank lent cash to its undisclosed borrower, collateralised by Bitcoin that is the world’s oldest cryptocurrency. As per a spokesperson from Bloomberg, the loan comes with a 24-hour-risk management. The underlaying volatility of BTC does make such kind of a loan fall under the risky category. Goldman Sachs taking this step testsifies its support for the crypto sector, which the lender has been exploring in depth.
A Bitcoin-backed loan allows the asset holder to borrow fiat currency like Rupees or Dollars after fronting-up their BTC as a collateral.
Since Bitcoin is volatile, its value is subjected to incurring loss at any point. In such an instance, the borrowing party may be asked to add more collateral against the risk of getting their assets liquidated, CoinTelegraph reported.
The bank had begun researching on Bitcoin-backed loans around December last year.
This is not the first time however, that Goldman Sachs has taken a progressive approach towards experimenting with cryptocurrency.
Earlier this week the lender said that it is looking to tokenise real-life assets as non-fungible tokens (NFTs).
Last month, the investment bank said it is planning to offer over-the-counter (OTC) options trading for Ethereum to its clients.
The bank does not offer spot crypto trading but offers access to crypto Exchange Trader Funds (ETFs) and options trade. Institutional traders usually prefer to invest in crypto through a proxy, as opposed to holding tokens directly.
Meanwhile, other big names in the financial sector that are interested in issuing cryptocurrency-backed loans include Silvergate and Signature, CoinDesk had reported last year.