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Coinbase Is the Mystery Firm That Took Out First BTC-Backed Loan

Cryptocurrency May 04, 2022 06:00AM ET
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© Reuters. Coinbase Is the Mystery Firm That Took Out First BTC-Backed Loan

    • Coinbase (NASDAQ:COIN) was the unknown firm that took out Wall Street’s first Bitcoin-backed loan from Goldman Sachs (NYSE:GS).
    • The loan issued by Goldman had been taken out by Coinbase to strengthen the ties between the DeFi and TradFi worlds.
    • The loan was collateralized by a portion of Coinbase’s total holdings of 4,487 Bitcoin (BTC).

It has recently been revealed that Coinbase, America’s biggest cryptocurrency exchange, was the unknown firm that took out Wall Street’s first Bitcoin-backed loan from Goldman Sachs.

The Bitcoin-backed loan issued by Goldman had been taken out by Coinbase in an attempt to strengthen the ties between the DeFi and TradFi worlds, according to a report released by Bloomberg on Tuesday.

Brett Tejpaul, the head of Coinbase Institutional, stated that “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.”

The total dollar value of the loan has not been disclosed as of yet. However, the loan was collateralized by a portion of Coinbase’s total holdings of 4,487 Bitcoin (BTC), which is worth around $170 million at current prices. There is 24-hour risk management included with the loan, and Coinbase will also have to top up its BTC collateral should prices fall too low.

Until now, Bitcoin-backed and other crypto-backed loans have been commonplace in the crypto industry but have been regarded as too risky by the traditional finance sector, given the volatile nature of cryptocurrencies.

However, asset management firm Arca said in a blog post on May 2 that potential borrowers may be looking for more such options. The blog post stated that “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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Coinbase Is the Mystery Firm That Took Out First BTC-Backed Loan
 

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