Coinbase took out the first Bitcoin-backed loan from Goldman Sachs | Cryptocurrency

America’s largest cryptocurrency exchange, Coinbase, has been revealed as the mysterious company that secured Wall Street’s first Bitcoin-backed loan from Goldman Sachs.

Goldman Sachs has $2.5 trillion in assets under management in 2021.

Bloomberg reported on Tuesday that the Bitcoin-backed loan issued by Goldman was taken out by Coinbase as a way to deepen ties between the crypto and tradfi worlds, with Coinbase Institutional Head Brett Tejpaul stating that:

“Coinbase’s work with Goldman is a first step in recognizing crypto as collateral that deepens the bridge between fiat and crypto economies. »

The dollar value of the loan was not disclosed, but it was secured by a portion of Coinbase’s total holdings of 4,487 Bitcoin, worth around $170 million today. The loan features 24-hour risk management, but requires Coinbase to top up its BTC collateral if prices fall too low.

While Bitcoin-backed loans and other cryptocurrency-backed loans are commonplace in the cryptocurrency industry, especially on decentralized finance (DeFi) protocols, they are a curiosity in traditional finance where the cryptocurrency is considered too risky and volatile as collateral.

However, asset management firm Arca wrote in a May 2 blog post that potential borrowers were looking for more such options. It said, ” [This loan] demonstrates the willingness of institutions to use new tools with old techniques.

“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.” »

News of the Bitcoin-backed loan prompted comments on Twitter. Regarding the loan, Bitcoin podcaster Preston Pysh tweeted Wednesday: “No wonder the SEC is hiring people. »

Armstrong on social media

Meanwhile, Coinbase CEO Brian Armstrong laid out his vision for free speech through decentralized social media platforms. He told the Milken Institute on May 2 that under new owner Elon Musk, Twitter has the ability to “essentially adopt the use of a decentralized protocol” on which the platform could operate.

“I think freedom in all its forms is worth fighting for and crypto, in large part, is about economic freedom. Freedom of speech is another version.

Armstrong believes that a decentralized social media platform would allow content creators to set their own moderation policies and that access to all content would be democratized rather than algorithmically ordered. This would prevent certain streams of content from being stifled on a platform and allow users to see what they choose.

Related: Coinbase CEO responds to insider trading allegations by changing token listings

If Twitter doesn’t seize the opportunity, Armstrong points out that there are already teams working on decentralized social media platforms, which he called DeSo, where users can own their own identity on the platform.

Twitter founder Jack Dorsey has been working on a decentralized social media platform called Bluesky since 2019, which operates independently from Twitter. Bluesky aims to drive adoption of technology where “creators control relationships with their audiences and developers have the freedom to build.”

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Coinbase took out the first Bitcoin-backed loan from Goldman Sachs | Cryptocurrency


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