Coinbase crypto exchange appears as recipient of first BTC-backed loan from Goldman Sachs

Last week, Goldman Sachs made the first-ever Bitcoin-backed loan to an “unknown” party in the US. Crypto exchange Coinbase has emerged as the recipient of this loan. Brett Tejpaul, the head of Coinbase Institutional, briefed Bloomberg on the development. The deal aims to bridge the gap between fiat currencies as well as virtual assets including cryptocurrencies. Goldman Sachs is a Wall Street-backed investment bank. Goldman Sachs’ facilitation of a bitcoin-backed loan itself is a testament to the US financial industry’s warming towards the crypto sector.

Tajpaul has noted that this move by Goldman Sachs will push crypto assets to the fore to be considered valuable collateral alongside existing ones like real estate and gold.

The amount of the loan issued against bitcoin as collateral is not disclosed by either company involved.

From what is known about this lending facility, it comes with 24-hour risk management.

The underlying volatility of BTC puts this type of loan in the risk category. Currently, the price of each bitcoin is around $41,700 (roughly 32 lakh rupees), according to Gadgets 360 crypto price tracker.

In its most recent report, institutional financial services firm Arca said Goldman’s experiment with its first Bitcoin-backed loan is a test before taking a bigger step.

“These kinds of bilateral agreements are rarely made in a vacuum; It’s far more likely that Goldman will see a lot of demand for this type of deal and just test the waters before it makes bigger waves,” the Arca report reads.

While the bank does not offer spot crypto trading services, it does offer access to crypto exchange-traded funds (ETFs) and options trading.

Goldman also plans to offer its clients over-the-counter (OTC) options trading for Ethereum.

At a time when Goldman is experimenting with bitcoin-backed lending, suspicions have already arisen regarding such actions.

Rating agency Weiss Ratings, for example, recently warned that crypto-backed mortgages come with “risk” everywhere.

According to Weiss Ratings editor Jon D. Markman, lenders that allow people to use crypto to secure a mortgage could pose a higher risk in current market conditions, reported. Markman continued to focus on the mortgage lending sector. Coinbase crypto exchange appears as recipient of first BTC-backed loan from Goldman Sachs

Ryan Sederquist

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