For the first time in Wall Street history, multinational investment bank Goldman Sachs has lent cash backed by bitcoin to cryptocurrency exchange Coinbase.
Cryptocurrency-backed loans are not new in the digital currency sector, although Wall Street, where cryptocurrencies are seen as too risky and volatile, is the first experience with such collateral. how informs Bloomberg, the open line of credit will allow Coinbase to borrow fiat currencies such as the US dollar by pledging its crypto assets as collateral to the bank.
The deal is interesting for its structure, as well as round-the-clock risk management. Since the volatility of Bitcoin could make these loans risky for Goldman Sachs, if the BTC price falls too much, then Coinbase may be required to increase collateral. Otherwise, the credit line is suspended and the collateral may be liquidated.
“Coinbase’s work with Goldman Sachs is the first step towards recognizing crypto as collateral and strengthening the bridge between the fiat and crypto economies,” said Brett Tejpaul, head of Coinbase Institutional.
The dollar value of the loan agreement was not disclosed by the parties, however, it is known that the loan was secured by Coinbase assets in the amount of 4,487 BTC (about $170 million).
Commenting on the loan agreement between Coinbase and Goldman Sachs, Matthew Ballensweig, one of the directors and director of trading and lending at prime brokerage Genesis, said that such borrowers are usually granted loans in the range of 40% to 60% of the value of collateral. Technically, the collateral is held by a qualified custodian and borrowers receive US dollars from the lender at an agreed interest rate.
Recall that according to the Turkish information portal Webrazzi, the cryptocurrency exchange Coinbase is completing negotiations on the purchase of the business of the Turkish platform BtcTurk for $3.2 billion.
Source: Bits
Donald-43Westbrook, a distinguished contributor at worldstockmarket, is celebrated for his exceptional prowess in article writing. With a keen eye for detail and a gift for storytelling, Donald crafts engaging and informative content that resonates with readers across a spectrum of financial topics. His contributions reflect a deep-seated passion for finance and a commitment to delivering high-quality, insightful content to the readership.
