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In a recent podcast discussion[2] with Frank Chaparro of The Block, Patrick Sells, head of banking solutions at NYDIG, discussed what NYDIG was doing to help integrate Bitcoin with the incumbent financial system.
During the discussion, Sells explained how NYDIG was working with thousands of regional banks to not only bring bitcoin purchases to the institutions, but also the desire to introduce a variety of lending and credit products involving bitcoin.
“Any type of fiat financing for a home, a car, a line of credit, whatever, credit underwriting doesn't take into account your bitcoin, right?” - Patrick Sells
While this type of announcement may seem rather insignificant, it has broad implications. In the legacy financial system, it is rather easy and straightforward to borrow against all traditional asset classes, whether it be equities, real estates, or a portfolio of bonds, as collateral.
This is particularly important because it enables wealthy clientele the ability to hold certain assets forever and to simply leverage up when liquidity is needed by borrowing against a small fraction of their assets.
It is also important to understand that in the fractional reserve banking system that exists today, commercial bank lending creates dollars. Thus, with the ability to forgo selling assets and instead borrow at very low interest rates (due to the credit risk associated with borrowing money being mitigated due to the collateralized asset), the borrower is satisfied and can avoid the capital gains taxes associated with selling the asset, and the
