TL;DR Breakdown
- Goldman Sachs and other financial institutions seek to use BTC as collateral for loans.
- Top-tier banks are set to consider trading other crypto products like futures instead of cryptos themselves.
Goldman Sachs is among reputable US banks considering BTC applications as loan collateral. These financial services providers are also willing to trade cryptocurrency spin-offs like futures in the place of the original cryptos.
These banks are studying how to utilize tri-party repo arrangements to use BTC without touching its spot market. If this happens, the future of crypto brokerage could become better since these banks are already laying the excellent groundwork for the same.
Goldman Sachs is leading other institutions
Goldman Sachs is among the banks seeking approval for institutional lending using tri-party repo and collaterals per an inside source. The source added that if Sachs has a liquidation party, they will give lending services that do not involve BTC in their paperwork.
Sachs is not alone in this race; other big names like Silvergate and Signature are also planning to apply for crypto-backed loans approval. This idea first came from Brian Brooks, the chief of office of the Comptroller of Currency (OCC). Brooks said that BTC is similar to the traditional currency, and the banks can figure out a way to safe keep it.
Another source said that while some banks want to work like Goldman Sachs in this lending method, others want to include the BTC in their paperwork. The source added that several banks are about half a year away from introducing these plans while others take longer.
Is BTC banking coming any time soon?
Currently, many financial institutions are finding their way around the crypto-financial disruption. The financial regulatory authority is also doing its stunts regarding cryptocurrency adoption. In October 2021, the Federal Deposit Insurance Corporation (FDIC) confirmed that they were studying possible solutions for holding BTC.
Next month, FDIC, Federal Reserve, and the OCC announced that they will jointly give a regulatory framework for banks to trade BTC in 2022. As a result, many banks have been exploring possible solutions towards engaging with these digital assets. These developments fuel the current craze surrounding solutions like BTC-backed loans.
Even though these arrangements are gaining traction, the main player is still silent. The Us regulatory board, the SEC, is yet to give its stunt on this whole saga. However, the final regulatory framework for the BTC loaning may come from the SEC, OCC, or the Commodity Futures Trading Commission(CFTC).
Other crypto providers like Fidelity Digital Assets and Coinbase are also looking to partner with the US banks in BTC-backed loaning. Per reports, Coinbase is already in communication with some financial institutions seeking to offer professional advice to them. Per another source, some small lenders and non-bulge-bracket financial institutions are also open to these kinds of loans.
