Coinbase, a well-known cryptocurrency exchange, has partnered with Goldman Sachs in the bank’s first bitcoin-backed loan, according to Bloomberg.
According to sources, the Goldman Sachs loan was the firm’s first bitcoin-backed lending facility. Coinbase, the borrower, received an undisclosed sum of money in return for an equally undisclosed amount of collateralized bitcoin.
“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, the head of Coinbase Institutional, responded.
Even as bitcoin-backed loans aren’t technically new, they do stand out when it comes to traditional financial organizations such as Goldman Sachs. According to Matthew Ballensweig, managing director and co-head of trading and lending at cryptocurrency exchange Genesis, borrowers often post bitcoin at a loan-to-value ratio of 40 percent to 60 percent when taking out these loans.
Goldman Sachs dipped their toes into the pool of bitcoin in March, despite being new to the concept of utilizing bitcoin as collateral for loans. The bank introduced a non-deliverable bitcoin option at the time, which is a bitcoin derivative that pays the borrower in cash, in this case Goldman Sachs. This transaction was handled by Galaxy Digital Holdings, a bitcoin financial services firm founded by a former Goldman Sachs partner.
“These types of bilateral agreements are rarely done in a vacuum,” according to Arca, an institutional financial services organization that deals in cryptocurrencies. “It’s far more likely that Goldman is finding a lot of demand for this type of deal and is just testing the waters before making a bigger splash,” one analyst speculates.