Last week, Goldman Sachs offered its first ever Bitcoin-backed lending facility, as reported by Bloomberg, in a move reflecting the growing institutional adoption of the digital asset. Now, the publication has reported that the investment banking client for the loan is Coinbase, a widely welcomed development in the industry.
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“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, told Bloomberg.
As of December 31, 2021, Coinbase held $566.5 million in crypto, including $183.4 million in Bitcoin, according to the company’s annual report.
GOBankingRates contacted Coinbase and Goldman Sachs.
Jae Yang, CEO of Tacen, told GOBankingRates that it’s easy to see how such a product offering takes people by surprise, because just a few years ago, big financial institutions were very negative about the regard to almost everything related to cryptography.
“But that has certainly changed with the flood of institutional money entering the space, and it certainly makes sense for Coinbase to be involved,” Yang said. “You could describe Coinbase as the OG of crypto exchanges, and the level of expertise the company has is just enormous. It is therefore not surprising, when looking at this development from such a perspective, that Goldman relies on the expertise of Coinbase.
According to Yang, crypto-collateral lending will soon become a massive industry here.
“Already we see lenders looking to use Bitcoin as collateral for mortgages, and that makes sense because, as many have argued, Bitcoin is both digital gold and pristine digital collateral. Michael Saylor of MicroStrategy has been using Bitcoin this way for over a year now. And many others are following its lead. It will be a huge market for Goldman,” Yang added.
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In a report released on May 2, crypto firm Arca said that while details of the loan are scarce, it demonstrates institutions’ willingness to use new tools with old techniques.
“These types of bilateral agreements are rarely done in a vacuum; it is 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,” according to the report.
Goldman told Bloomberg the deal was attractive to the bank because of its structure and round-the-clock risk management.
Garry Krugljakow, founder and CEO of GOGO Protocol, told GOBankingRates that the move will trigger a flood of traditional institutions to follow.
“It’s also a huge market opportunity for Coinbase to become a top player in this type of product offering. Going forward, given how quickly this space is changing, I think DeFi protocols will play an increasingly important role in these secured loans,” he said.
Krugljakow added that Bitcoin is the stepping stone – as evidenced by the amount MicroStrategy and other companies have bought to shore up their balance sheets – but it will soon become clear to Wall Street that the pure functionality involved in DeFi will be “too enticing to pass up.” high.”
“In DeFi, collateral can be offered in a way that provides borrow-lending markets with various forms of return. And the fact that you don’t have to sell your coins in all of this is just a huge potential benefit. People don’t want to take a second mortgage on their house – it’s much more useful to use Bitcoin and other crypto assets for that kind of utility,” he said.
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In March and also in an industry first, Goldman Sachs announced that it had executed the first over-the-counter (OTC) cryptocurrency transaction with Galaxy Digital, reflecting the bank’s continued expansion of cryptocurrency offerings. crypto and demonstrating the continued maturation and adoption of digital assets by banking institutions. .
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