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Exploration to accept Cryptocurrencies as collateral; Banks rushing towards a new opportunity

The Global Market in the past recent year has seen an incredibly fast rise of cryptocurrency, which includes Bitcoin, Ether, and other crypto coins.

The market has seen this rise of cryptocurrency as the opening of a number of opportunities for new businesses, mostly for investors and also money lenders.

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The terrific returns associated with the crypto world, while compared with returns from other investment tools and sectors, make the investors overlook the risk part which is involved with cryptocurrencies.

Banks who initially were hesitant to explore this new sector of investment are now looking towards capitalizing on this high income generating difficult sector.

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Banks like Kotak Mahindra in India have seized the opportunity of partnering with online exchanges supporting payments of cryptocurrency and looking at new opportunities to enter this high investment returning sector.

The Banks in the United States have similarly decided to take up supporting online exchanges to support cryptocurrency payments; they have also explored all opportunities to use Bitcoin, Ether, and other crypto coins as collateral security against cash loans to institutions and individuals.

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All crypto-backed retail loans or institutional loans are basically similar to any other secured loan, which the loan borrowers take against any other collateral.

The method is the same as a mortgage loan taken for a vehicle in which an individual can present his car or his house as collateral to secure a loan of representative value.

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Even though the major banks might not get directly involved in the trading cryptocurrency but will definitely tap the growing market of investors of cryptocurrency trades.

American Multinational bank named Goldman Sachs is the leading bank that is tapping the investor market, which trades in cryptocurrencies, as stated by a CoinDesk report.

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Other banks like Silvergate and Signature have also announced to use of cryptocurrencies as collateral against cash loans borrowed by individuals and institutions.

Banks are also exploring a new method which can be named as Tri-Party Repo type arrangement, which means an opportunity of borrowing funds by selling held securities with an arranged agreement to repurchase them; this will involve a third-party agent, all these methods will lead to nd=ew brokerage service in the future.

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This bold opportunity taken by banks shows them gaining confidence; if regulations are made clear, it will accelerate not only the economic growth but also the acceptance of crypto coins.

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