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US Banks Exploring Bitcoin-Backed Loans

Goldman Sachs is among a number of tier-one US banks exploring the use of Bitcoin as collateral for cash loans to institutions, according to a Coindesk article.

This new development effectively lays the groundwork for more integrated crypto prime brokerage services and reflects the growing institutional adoption of what is now a $2.7 trillion asset class.

Silvergate and Signature – both crypto-friendly banks – have already set a precedent for Goldman Sachs and other US banks, with the launch of their bitcoin-backed loans earlier this year.

Using Bitcoin as collateral for cash loans was given a nod of approval from Office of the Comptroller of the Currency (OCC) chief Brian Brooks when he said Bitcoin was the equivalent of cash and that banks could indeed be safekeepers of it.

Despite this, however, the US regulatory stance on crypto remains a complicated one, with regulation coming from a mix of different governing bodies.

The banks are looking to partner with digital asset custodians, such as Coinbase and Fidelity Digital Assets, the latter of which recently partnered with Nexo to bring professional crypto products to market. To read more on the partnership click here.

“We’ve probably spoken to half a dozen big banks about [bitcoin-backed loans],” said a spokesperson interviewed by Coindesk. “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.”

Exploring the use of Bitcoin-backed cash loans is another step toward the institutional embrace of cryptocurrencies. At DeFi Consulting Group, we specialize in helping family offices and other institutional investors understand and gain access to Cryptocurrencies and Decentralized Finance. Reach out to our team for guidance on how to effectively approach this space.

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