Bitcoin-backed bonds arrive on Wall Street as Goldman embraces crypto-collateral

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Earlier in the week, we outlined the landmark El Salvador bitcoin bond deal – a billion-dollar deal backed by $ 500 million in bitcoin that the crypto-embracing nation would use to fund the construction of ‘a “Bitcoin city”. As we said at the time:

Other countries are likely to consider how they too can get money without having to deal with the predatory IMF bankers.

A Bitcoin bond is a great way to get funding outside of the confines of the traditional financial system.

Well, according to a CoinDesk report, Goldman Sachs and a handful of other leading U.S. banks are finding out how to use bitcoin as collateral for cash loans to institutions, according to three people familiar with the plans.

Emulating tripartite repo-type arrangements (a way to borrow funds by selling securities with a repurchase agreement, involving a third-party agent), banks are exploring ways to follow the same path so as not to touch bitcoin, such as ‘other synthetic products.

“Goldman was working to get the loan approval against collateral and tripartite repo,” one of the people said.

“And if they had a liquidation agent, then they were only doing secured loans without Bitcoin ever touching their balance sheet.”

Goldman is not alone; A handful of major banks are following the lead set by crypto banks Silvergate and Signature, both of which announced bitcoin-backed cash loans earlier this year.

“We have probably spoken to half a dozen major banks about [bitcoin-backed loans]”said a second person from a large institutional trading company.

“Some of them are in the next three to six months category and some are further away. What’s interesting is that some of these banks will use their own balance sheets to make the loan. Others will unionize it.

The regulatory position on such activities in the United States remains complicated. Depending on the bank and what exactly is proposed, the regulation could come from a mixture of the OCC, the SEC or the CFTC; this is all likely to chomp on the brakes to curb it under pressure from Senator Elizabeth Warren and Treasury Secretary Yellen.

“Non-inflated banks are also building in this area of ​​tripartite lending,” said a third person.

This is all pretty optimistic for the crypto community, and it shows how Bitcoin can function as the backbone of a new financial system.

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