In the crypto world, Goldman Sachs has made history. This time, the Wall Street bank has given its first Bitcoin-backed loan, contributing even more to its crypto adoption strategy.
The loan was made in cash to an unidentified borrower, but it was collateralized by the world’s top cryptocurrency, bitcoin.
The asset holder will be able to borrow fiat currency, such as dollars or euros, after pledging their bitcoin as collateral—a valuable object that a lender may take from a borrower if they fail to repay a loan within the agreed-upon conditions.
According to Bloomberg, the loan comes with 24-hour risk management, which means it is being maintained. Because of the volatility of Bitcoin, the loan is classified as “risky.” If the price of Bitcoin begins to fall, causing losses, the borrower may be asked to provide more collateral to reduce the risk of having their holdings liquidated.
This is not the first time Goldman Sachs has experimented with digital assets in an unconventional manner. Last month, the investment bank executed its first over-the-counter Bitcoin transaction with tech startup “Galaxy Digital,” a historic event for Wall Street institutions.
However, rather than spot crypto trading, the bank provides access to crypto ETFs and options trading. Institutional traders often prefer to invest in cryptocurrencies via an intermediary rather than owning tokens directly.
