The largest crypto exchange in the United States, Coinbase, has gotten a Bitcoin-backed loan from one of the leading financial service providers in the world, Goldman Sachs.
Last month, Goldman Sachs announced that it had created the first collateralized Bitcoin loan on Wall Street, paving the way for other top players to follow suit as Wall Street continually mulls over adopting cryptocurrency-backed loans.
As per the 2021 report on holdings among the top finance behemoths in the U.S., Goldman Sachs has a massive $2.5 trillion worth of assets under its custody.
According to a Bloomberg report on Tuesday, a Bitcoin-backed loan from Goldman Sachs has been issued to Coinbase to strengthen the ongoing effort to harmonize cooperation between the crypto industry and the traditional financial sector.
Brett Tejpaul, head of Coinbase institutional relations, noted that the collaboration between Coinbase and Goldman Sachs is the first step in recognizing digital currency as collateral, which deepens the further partnership between fiat currencies and the crypto industry.
The BTC Collateral
The value of the loan in fiat has not been revealed. However, it is believed that Coinbase collateralized some portion of the loan it took from Goldman Sachs in Bitcoin. The loan has 24-hour risk management, which requires the crypto exchange to top up its Bitcoin collateral should the price of the BTC token fall.
Meanwhile, there have been various crypto-backed loans in the digital asset industry, especially in the decentralized finance (DeFi) platforms, but implementing the same traditional finance, where the general view of crypto is volatility, to be used as collateral, is a positive development.
A statement from the asset management firm Arca on May 2 disclosed that many potential borrowers are exploring other available options. The Bitcoin-backed loan demonstrates that traditional financial service providers are willing to adopt innovations alongside old techniques.
It is believed that Goldman Sachs is seeing an increased demand for this latest transaction and are testing the waters before making a further move in the coming months.
After the first bitcoin-backed loan was announced, various commentaries on Twitter about the new development, with a popular Bitcoin podcaster tweeting that the SEC has been hiring people to meet the new demand for the crypto-related transaction.
Coinbase’s CEO Speaks on Social Media
The CEO of Coinbase, Brian Armstrong, has voiced his view on free speech to be achieved through decentralized social media. According to Armstrong, under the new ownership of Elon Musk, Twitter has the opportunity to adopt the use of the decentralized protocol on its platform, which it could operate on in the future.
He added that freedom is worth pursuing and defending and that crypto signifies freedom, which is economic freedom. Freedom of speech is another part of the freedom that he subscribes to and what he promotes.
Coinbase’s CEO believes that the decentralized social media platforms would give content creators the means to establish their moderation policies and access their content without a centralized team.