The crypto exchange, after receiving the loan against collateralizing bitcoin, has become the first one to do this and leading others to do the same
As per Bloomberg reported on Tuesday, prominent American multinational investment bank and financial services company Goldman Sachs has issued bitcoin backed loans that had been taken out by the largest cryptocurrency exchange in the US, Coinbase. This step is being seen as deepening the bond between the crypto and traditional finance world on which Coinbase Institutional head Brett Tejpaul stated that the work Coinbase with Goldman is considered to be a first step towards recognizing crypto as collateral thought would act to deepen the bridge between the traditional fiat based economies and crypto economies.
The largest crypto exchange in America, Coinbase, has been revealed as the mysterious firm that took out the first bitcoin backed loan on entire Wall Street from Goldman Sachs. The multinational banking services provided by the institution has about $2.5 trillion worth of assets under management as of data till 2021.
However, the value of the loan in the dollar has not been disclosed yet, but it was collateralized by the total holdings of Coinbase’s 4,487 Bitcoin, which has a total worth around $170 million as per the current rates. Other than the loan amount, it features a risk management assessment for 24 hours but requires the crypto exchange to top up its collateral in bitcoin if prices tend to fall too low than the value.
While in the crypto industry, bitcoin and other crypto backed loans are commonplace, especially on decentralized finance or DeFi protocol. These are matters of curiosity in the traditional finance space, where crypto is still seen as too risky and volatile to keep it as collateral.
In its blog post on 2nd May, Asset management firm Arca wrote that potential borrowers are keenly interested and looking for more such options. The post stated that this loan disbursement demonstrates the willingness of traditional institutes to utilize new tools like crypto with old techniques. The blog further outlined that it is far more likely to see that Goldman is looking up to a huge demand for these types of transactions, and currently, it’s just testing the waters before diving deep or making a bigger splash.
Source: https://www.thecoinrepublic.com/2022/05/04/goldman-sachs-gave-out-the-first-bitcoin-backed-loan-to-this-crypto-exchange/