Bitcoin Backed Loans Considered by Big Banks

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  • Some of the world’s biggest banks could soon issue cash loans with bitcoin as collateral
  • Coindesk reports that Goldman Sachs among others is interested in the idea
  • Fidelity announced on Wednesday that it was allowing institutional customers to take out loans with bitcoin collateral

Some of the world’s biggest banks are considering using bitcoin as collateral for cash loans, illustrating further confidence in the digital asset. According to Coindesk, which cites three people familiar with the plans, Goldman Sachs is among a “handful of tier-one U.S. banks” considering how to use bitcoin as collateral for cash loans to institutions. The news comes a day after Fidelity Digital Assets revealed that it was allowing its institutional customers to do just that in a partnership with BlockFi.

Banks Won’t Hold the Bitcoin

If Goldman Sachs and other banks were thinking about entering the bitcoin-backed loans market, Coindesk’s sources say that it would likely be through something along the lines of a ‘tri-party repo’ arrangements, which is a way of borrowing funds by selling securities through a third party and having an agreement to repurchase them. Using such a method would allow banks to get involved in Bitcoin without needing to have direct exposure to it.

Big banks have famously become much more bullish on Bitcoin and to a certain extent Ethereum in recent years, and issuing cash loans on the basis of what is seen as a hugely volatile asset would be a huge step in a positive direction as far as Bitcoin’s reputation goes.

Fidelity Takes the Plunge

One asset manager that has decided to go full beans on the idea of bitcoin-backed loans is Fidelity, which issued a press release on Wednesday to say that institutional customers could now apply for cash loans using bitcoin as collateral, with Fidelity holding the cryptocurrency but issuing the loans through BlockFi.

Fidelity was one of the first big asset managers to get into the crypto space, so it’s not a surprise to know that they would be happy to hold the coins themselves.