- Coinbase will work with Goldman Sachs on Bitcoin lending.
- Wall Street banks are seeing increased demand for crypto facilities and services.
- Bitcoin prices fell to a 7-week low and Coinbase stock rose slightly.
Last week, Goldman announced its first-ever Bitcoin (BTC)-backed loan in which the king of crypto would be used as collateral to secure a cash loan for the borrower.
It has now been revealed that the largest US exchange Coinbase will work with the Wall Street bank on crypto-collateralized loans; however, terms of the loan facility were not disclosed.
On May 3, Brett Tejpaul, head of Coinbase Institutional, told Bloomberg:
“Coinbase’s work with Goldman is a first step in recognizing crypto as collateral that deepens the bridge between fiat and crypto economies,”
Bridging the gap
Bitcoin-backed loans aren’t new to the crypto industry, but they are to Wall Street. The move signals that major banks are finally turning to crypto and expanding their services to onboard institutional clients with investments in digital assets. Earlier this week, JPMorgan CEO Jamie Dimon said crypto was more efficient than banks for international transfers.
Goldman already has a crypto-focused team and traded its first-ever Bitcoin options over-the-counter (OTC) in March, becoming the first major US bank to do so.
Lending in the crypto industry typically involves borrowers providing Bitcoin at a loan-to-value ratio of between 40% and 60%. This is according to Genesis Managing Director of Trading and Lending, Matthew Ballensweig, who added:
“Terms may vary as well as other prepayment terms, but it’s a simple structure to bring institutional lenders to market,”
Coinbase (COIN) has previously structured similar crypto loans with crypto-friendly banks such as Silvergate Bank and Signature Bank, and similar structures with major investment banks are in the works.
Coinbase held over $566 million in crypto assets, including over $183 million worth of Bitcoin at the end of 2021. It also reported cash equivalents in the range of $7 billion, making it a prime candidate to provide guarantees.
Crypto Mortgage Risks
In a related matter, agency Weiss Ratings recently issued a warning about the use of Bitcoin and crypto assets to secure home loans. The research firm advised caution with such mortgages, citing falling stock and crypto markets this year, a US housing bubble, rising interest rates and upcoming Reserve policy changes. federal.
Bitcoin prices fell again today, falling another 1.3% to drop below $38,000 for the first time since mid-March. Coinbase stock had gained 2.17% to hit $123.5 in after-market trading.