Coinbase Collateralized Bitcoin for the First BTC-Backed Loan by Goldman Sachs
Wall Street banking giant Goldman Sachs announced that its first-ever Bitcoin-backed loan was lent to Coinbase. However, neither of the two has disclosed the amount and other details regarding the deal.
Though Bitcoin-backed loans are not unusual for crypto firms and decentralized protocols that use “wrapped Bitcoin” for Ethereum-based applications, Goldman’s latest move of greenlighting such a loan to Coinbase could indicate that Wall Street is transitioning to embrace the asset class.
- Brett Tejpaul, head of Coinbase Institutional, wrote to Bloomberg that the partnership is the first step in recognizing crypto as collateral that deepens the bridge between the fiat and crypto economies.
- In the case of putting Bitcoin as collateral, the loan-to-value rate usually remains in between the 40% to 60% range, according to Matthew Ballensweig, managing director and co-head of trading and lending at crypto prime brokerage Genesis. For instance, for 100 dollars taken out as a loan, there needs to be roughly $167 – $250 worth of bitcoin locked up as collateral held by the lender.
- Besides the banking giant, small-sized crypto-friendly banks like Silvergate Bank and Signature Bank have offered crypto-backed loans to clients, including crypto broker Genesis.
- Institutional financial services firm Arca’s latest report suggests that Goldman’s bold experiment, encouraged by the increasing demand for cryptocurrencies, is a water test before “making a bigger splash.”
- Goldman Sachs’ foray into crypto has become aggressive in recent months. The firm announced plans to add to that offering with OTC Ethereum options last month. Analysts at the bank have cited ETH’s upcoming ‘Merge’ and upgrade to proof-of-stake as the major catalyst for upside momentum,
- Coinbase held more than $566 million of cryptocurrencies, including over $183 million worth of Bitcoin, its 2021 annual report stated. Meanwhile, the firm reported it had cash equivalents of $7.1 billion, excluding restricted cash and customer custodial funds.
