Bank loan

Goldman Sachs partners with Coinbase for the bank’s first Bitcoin-backed loan

  • Coinbase has secured bitcoin for a cash loan with Goldman Sachs, the terms of which are currently undisclosed.
  • The loan was facilitated by Goldman Sachs as part of the bank’s first bitcoin-backed loan.
  • Goldman previously introduced itself to bitcoin via an undeliverable bitcoin option facilitated by Galaxy Digital.

Coinbase, a well-known cryptocurrency exchange, has partnered with Goldman Sachs in the bank’s first bitcoin-backed loan, according to a report by Bloomberg.

Reportedly, the loan facilitated by Goldman Sachs was its first bitcoin-backed lending facility. Coinbase, the borrower, received an undisclosed sum of money for an equally undisclosed amount of secured bitcoin.

“Coinbase’s work with Goldman is a first step in recognizing crypto as collateral that deepens the bridge between fiat and crypto economies,” Brett Tejpaul, head of Coinbase Institutional, replied in an email to Bloomberg.

Although bitcoin lending is not entirely new, it is still very notable when it comes to traditional finance companies, such as Goldman Sachs. Matthew Ballensweig, managing director and co-head of commerce and lending at Genesis, reportedly explained that the standard terms associated with these loans typically see borrowers posting bitcoin at a loan-to-value ratio of between 40% and 60%.

While Goldman may be new to the process of securing bitcoins for loans, the bank dipped its toes into the bitcoin pool last March. At that time, the bank initiated a non-deliverable bitcoin option, which is a derivative of bitcoin that pays the borrower, in this case Goldman Sachs, in cash. This trade was facilitated by Galaxy Digital Holdings, a cryptocurrency financial services company founded by a former Goldman Sachs partner.

“These types of bilateral deals are rarely made in a vacuum,” says a report d’Arca, an institutional financial services company specializing in cryptocurrencies. “It’s much more likely that Goldman is seeing strong demand for this type of transaction and is just testing the waters before taking a bigger plunge.”