According to Bloomberg, the global investment banking firm, Goldman Sachs facilitated its first Bitcoin-backed loan a few days ago. The loan was taken out by the cryptocurrency exchange platform, Coinbase Global.
According to the terms of the loan, the crypto platform collateralized Bitcoin in exchange for cash with the Wall Street Giant, who will make it happen via its partnership with Galaxy Digital.
The head of Coinbase Institutional, Brett Tejpaul said, “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.”
Further details about the loan were not disclosed. However, Coinbase held $183 million worth of Bitcoin according to its 2021 annual report.
A report from the crypto hedge fund Arca stated, “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.”
Matthew Ballensweig, the managing director and co-head of trading and lending at crypto prime brokerage Genesis said that such loans usually post Bitcoin at loan-to-value in the 40% to 60% range. The borrowers receive U.S. dollars from the lender at an agreed upon interest rate, while the collateral is held by a qualified custodian.
He further said, “Tenors can vary as well as other pre-payment terms, but it’s a simple structure to bring institutional lenders into the market.”
The news of a Bitcoin-backed loan offered by Goldman Sachs first came out a few days ago. The name of the borrower was not known then. A spokesperson for the bank said that the interesting part of this deal is its structure and the 24/7 year round risk management.
