Goldman Sachs recently made headlines for issuing its first loan backed by Bitcoin as collateral. It has now been revealed that Coinbase, the largest cryptocurrency exchange in the US, was the mystery borrower of this loan.
Coinbase uses Bitcoin as collateral for Goldman Sachs loan
Goldman Sachs is one of the largest financial institutions on Wall Street. In 2021, the institution was believed to have $2.5 trillion worth of assets under management. A Bloomberg report recently confirmed that Coinbase had used Bitcoin as collateral to take out a loan from the institution.
The issuance of this loan could be a way for Goldman Sachs to link the crypto space to the traditional finance sector. Wall Street has been especially forthcoming in supporting cryptocurrencies due to increased demand by investors.
“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,” said Brett Tejpaul, the head of Coinbase Institutional.
The amount of the loan has not been disclosed by either party. However, it was reported that the loan was backed by collateral from a part of Coinbase’s total Bitcoin holdings. The loan will have a 24-hour risk management feature, and Coinbase will be required to increase the Bitcoin used as collateral if the prices decline to extremely low prices.
Cryptocurrency-backed loans have become quite popular in decentralized finance (DeFi). However, the traditional finance sector has not been open to these loans because they are termed risky because of the increased volatility of crypto prices.
However, investors have been looking for more options to take out loans using their cryptocurrency holdings as collateral. The news of this loan has attracted attention from the cryptocurrency community that now believes this could set precedence, and more traditional finance institutions will be willing to endorse digital assets.
Coinbase CEO says crypto can benefit from freedom of speech
The CEO of Coinbase, Brian Armstrong, has praised the purchase of Twitter by Elon Musk, saying that it could foster decentralization and give people the freedom needed to defend the crypto sector and promote economic freedom.
Armstrong has also added that having a decentralized social media platform could enable content creators to create their own moderation policies, allowing them to access democratized content. The crypto community has supported Musk buying Twitter, given that the Tesla CEO is a crypto supporter.
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