Goldman Sachs and several other Wall Street banks are exploring ways to make institutional cash loans with bitcoin as collateral, CoinDesk reported. The report cited three people familiar with the plans of a group of U.S. tier-one banking institutions interested in the activity.
However, most banks will not hold “physical” bitcoin to make loans, but instead use synthetic products such as futures contracts.
The idea is to emulate representative of the tripartite the report said. It is a kind repurchase contract in which a third-party agent facilitates a transaction between a buyer and a seller by holding collateral and securing the delivery of cash and related assets to each party according to the terms of the agreement .
“Goldman is working on getting approval for a collateral loan and tripartite repo,” one of the people said. CoinDesk. “And if they have a liquidation agent, they just make a secured loan and never let bitcoin touch their balance sheet.”
A second person from a large institutional trading firm shared that while some banks will use a third party to make loans, others plan to use their own balance sheets.
“We may have talked to half a dozen major banks about [bitcoin-backed loans],” said the second. “Some of them are in the category for the next three to six months and others are further away. Interestingly, some banks will use their own balance sheets to make the loan. Others will provide this information. “
According to the report, Coinbase and Fidelity Digital Assets are seen as potential custodians the banks are discussing.
US banks and savings associations have been given the green light to deposit cryptocurrencies for customers last year through a letter published by the Office of the Comptroller of the Currency (OCC). In spite of question still at that time, this year, BNY Mellon and Bank of America announced plans for bitcoin custody services.
In October, the Chairman of the Federal Deposit Insurance Corporation (FDIC) speak US regulators are looking for ways to let traditional banks hold bitcoin. A month later, the FDIC issued Joint statement with the Federal Reserve and the OCC on the matter, said the three agencies will provide more regulatory clarity by 2022 to banking institutions interested in engaging with bitcoin.
https://bitcoinmagazine.com/business/report-goldman-sachs-and-other-wall-street-banks-are-exploring-bitcoin-backed-loans Report: Goldman Sachs and other Wall Street banks are exploring Bitcoin-backed loans