Wall Street is getting closer and closer to cryptocurrencies. Goldman Sachs on Thursday offered its first bitcoin-backed loan, according to Bloomberg.
The secured lending facility allowed a borrower to pledge Bitcoin (BTC) as collateral for a cash advance. As part of this agreement, bitcoin holders can now also receive fiat money in exchange for a bitcoin.
Accordingly, if the price of Bitcoin falls, borrowers must increase their collateral. If they cannot provide the required collateral, they risk liquidation. Bloomberg has not reported the exact details of the loan. However, a spokesman for Goldman Sachs described the loan as “interesting” due to its structure and 25/7 risk management.
Bitcoin-backed loans have recently gained popularity among Bitcoin mining companies. This is because companies that generate revenue in BTC must continue to pay their overheads and operating costs in US dollars or another currency. Goldman Sachs is now following other traditional financial conglomerates, including BlackRock (BLK), which has participated in a $400 million funding round for USDC stablecoin maker Circle.
Also blockchain real estate platform Propy announced that customers can now pledge their digital assets as collateral for property purchases. It’s all powered by Abra Borrow, a crypto credit and lending service. The cryptos deposited on Abra are then used to borrow US dollars, which in turn are used for home purchases.
Regardless of how the transaction is conducted, it is recorded on a blockchain. This then forms both the legal and the technical framework for all buyers involved in the transaction.