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Goldman Sachs set a major milestone late last month by extending the first Bitcoin (BTC) –backed loan from a Wall Street financial institution. While earlier reports did not reveal the identity of the borrower, recent updates reveal that the loan was made by a U.S.-based crypto exchange.
American crypto exchange Coinbase became the first borrower to avail of the first bitcoin-backed loan from Goldman Sachs, according to a Bloomberg report on Tuesday. The crypto-backed loan is the first of its kind extended by a Wall Street financial institution, which could signal crypto’s acceptance by mainstream finance.
A Coinbase official said that the issuance of the loan signals the recognition of cryptos such as Bitcoin (BTC) as collateral. “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,” head of Coinbase Institutional Brett Tejpaul said.
However, the amount of the loan was not disclosed in the report. What is known is that it was collateralized by a portion of the crypto exchange’s Bitcoin holdings of 4,487 BTCs, valued at around $170 million.
“We recently extended a secured lending facility where we lent fiat collateralized on BTC; BTC being owned by the borrower,” a Goldman spokeswoman said. “The interesting piece for us was the structure and the 24-7-365 day risk management.”
Using Bitcoin and other cryptos as collateral is common in decentralized finance protocols, according to Cointelegraph. However, traditional finance has been hesitant to join the bandwagon until now as crypto is viewed as too risky and volatile to be used as collateral.
“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,” asset management firm Arca wrote in a May 2 blog post.
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