Technology

Coinbase obtained the first bitcoin-backed loan from Goldman Sachs

The largest cryptocurrency exchange in the United States, Coinbase, has been revealed as the mysterious firm that obtained the first bitcoin (BTC)-backed Wall Street loan from Goldman Sachs.

Goldman Sachs has $2.5 trillion of assets under management as of 2021.

Bloomberg reported on Tuesday that the bitcoin-backed loan issued by Goldman Sachs had been taken up by Coinbase as a way to deepen the ties between the world of cryptocurrencies and traditional finance (TradFi), to which the head of Coinbase Institutional Brett Tejpaul stated that:

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

The dollar value of the loan has not been disclosed, but it was guaranteed by a portion of Coinbase’s total holdings of 4,487 BTC.worth about $170 million at the time of this writing. The loan features 24-hour risk management, but requires Coinbase to top up its BTC collateral if prices drop too low.

Although loans backed by bitcoin and other cryptocurrencies are common in the cryptocurrency sector, especially in decentralized finance protocols (DeFi), they are curious in traditional finance, where cryptocurrencies are considered too risky and volatile for collateral.

However, the asset management company Arca wrote in a blog post Monday that potential borrowers are looking for more such options. He said: “[Este préstamo] demonstrates the willingness of institutions to use new tools with old techniques:”

“It is much more likely that Goldman is seeing a lot of demand for these types of transactions and is just testing the waters before making a bigger splash.”

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

Armstrong on social media

Meanwhile, the CEO of Coinbase, Brian Armstrong has laid out his vision of free speech being enabled through decentralized social media platforms. On Monday he told the Milken Institute that, under new owner Elon Musk, Twitter has an opportunity to “essentially embrace the use of a decentralized protocol” on which the platform could operate.

“I think freedom in all its forms is worth defending, and cryptocurrencies, in large part, are about economic freedom. Freedom of expression is another version.”

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

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 since 2019 on a decentralized social media platform called Bluesky.which works independently of Twitter. Bluesky aims to drive the adoption of a technology where “creators are in control of relationships with their audiences and developers are free to build.”

Clarification: The information and/or opinions expressed in this article do not necessarily represent the views or editorial line of Cointelegraph. The information set forth herein should not be taken as financial advice or investment recommendation. All investment and commercial movement involve risks and it is the responsibility of each person to do their due research before making an investment decision.

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