Coinbase collateralized Bitcoin for a cash loan with Goldman Sachs, the terms of which are currently undisclosed. The loan was provided by Goldman Sachs as part of the bank's first Bitcoin-backed loan.
The first-ever credit line from Goldman Sachs Group Inc., backed by Bitcoin, is a new attempt by cryptocurrency exchange Coinbase Global Inc. to move money from Wall Street to the digital asset space, according to Bloomberg.
“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,” Brett Tejpaul, head of Coinbase Institutional, said in an email response to Bloomberg. Last week, a Goldman Sachs spokeswoman said the loan was secured by Bitcoin held by a previously unknown borrower.
According to Matthew Ballensweig, managing director and co-head of trading and lending at crypto prime brokerage Genesis, in such situations, borrowers usually post Bitcoin at loan-to-value in the 40% to 60% range. The collateral is held by a qualified custodian and the borrowers receive US dollars from the lender at an agreed interest rate.
“Tenors can vary as well as other prepayment terms, but it’s a simple structure to bring institutional lenders into the market,” Ballensweig said.
As of the end of 2021, Coinbase held over $566 million worth of cryptocurrencies, including over $183 million worth of Bitcoin. The firm said it had $7.1 Billion in cash and cash equivalents, excluding limited cash and customer custody.
“We are exploring similar structures with large investment banks that want exposure to the space,” Ballensweig said.
“These types of bilateral agreements are rarely done in a vacuum,” according to a report Monday from crypto hedge fund Arca. “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.”
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