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Coinbase Collateralized Bitcoin for Goldman Sachs’ First BTC-Backed Loan

Wall Street banking giant Goldman Sachs announced that its first-ever Bitcoin-backed credit was given to Coinbase. However, neither has disclosed the amount or other details regarding the deal.

Although bitcoin-backed loans for crypto firms and decentralized protocols using wrapped bitcoin are not uncommon Ethereum-based applications, Goldman’s recent move to greenlight Coinbase for such a loan may indicate Wall Street is turning to the asset class.

  • Brett Tejpaul, head of Coinbase Institutional, wrote to Bloomberg that the partnership is the first step in recognizing crypto as collateral, deepening the bridge between the fiat and crypto economies.
  • In the case of bitcoin being pledged as collateral, the loan-to-value ratio typically stays between 40% and 60%, according to Matthew Ballensweig, managing director and co-head of trading and lending at crypto-prime brokerage Genesis. For example, for $100 taken out as a loan, about $167 to $250 worth of bitcoin must be locked up as collateral by the lender.
  • Alongside the banking giant, small crypto-friendly banks like Silvergate Bank and Signature Bank have been offering crypto-backed loans to clients including crypto broker Genesis.
  • The latest report from institutional financial services firm Arca suggests that Goldman’s bold experiment, fueled by rising demand for cryptocurrencies promoted is a water test before it “makes a bigger throw”.
  • Goldman Sachs’ foray into crypto has become aggressive in recent months. The company announced plans to expand this 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 main catalyst behind the bullish momentum.
  • Coinbase held over $566 million worth of cryptocurrencies, including over $183 million worth of bitcoin, according to the 2021 annual report. Meanwhile, the company said it had $7.1 billion in cash equivalents available, excluding restricted cash and client deposits.

Source: Crypto News Deutsch

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