Coinbase Is The Borrower In Goldman Sachs’ Bitcoin-backed Loan
Crypto exchange Coinbase has reportedly partnered with banking giant Goldman Sachs in the first bitcoin-backed loan issued by the bank.
According to a report from Bloomberg, the loan facilitated by Goldman Sachs was its first lending facility backed by Bitcoin (BTC). Coinbase, who is the borrower, received an undisclosed amount of cash for an equally undisclosed amount of collateralized BTC.
Brett Tejpaul, head of Coinbase Institutional, commented:
“Coinbase’s work with Goldman is a first step in the recognition of crypto as collateral which deepens the bridge between the fiat and crypto economies.”
While bitcoin-back loans are not entirely new, the news is quite notable as it involves a traditional finance firm, Goldman Sachs.
According to Matthew Ballensweig, managing director and co-head of trading and lending at cryptocurrency-exchange Genesis, the standard terms associated with these loans typically see borrowers post bitcoin at a loan-to-value ratio between 40% and 60%.
Goldman might be new to the process of backing bitcoin for loans, but the bank got involved with bitcoin in March this year. Back then, the bank initiated a non-deliverable bitcoin option, which is a derivative of bitcoin that pays the borrower, in this case Goldman Sachs, in cash. The trade was facilitated by Galaxy Digital Holdings.
“These types of bilateral agreements are rarely done in a vacuum. It is far more likely that Goldman is seeing a lot of demand for this type of transaction and is just testing the waters before making a bigger splash.”
