Goldman Sachs’ first ever lending facility backed by bitcoin is the latest effort by crypto exchange Coinbase to bring money from the Wall Street to the digital asset space. “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,“ Brett Tejpaul, head of Coinbase wrote in an email to Bloomberg Quint.
Coinbase did not provide further details about the loan. A spokeswoman from Goldman Sachs said last week the loan was collateralized by bitcoin owned by the previously undisclosed borrower.
Such borrowers usually post bitcoin at loan-to-value in the 40% to 60% range, according to Matthew Ballensweig, managing director and co-head of trading and lending at crypto prime brokerage Genesis, speaking to BloombergQ. The collateral is held by a qualified custodian, and borrowers receive US dollars from the lender at an agreed-upon interest rate.
“Tenors can vary as well as other prepayment terms, but it’s a simple structure to bring institutional lenders into the market,” he said, adding that Genesis has already structured similar loans with crypto-friendly banks such as Silvergate Bank and Signature Bank: “We are exploring similar structures with large investment banks that want exposure to the space.”