- Coinbase has launched a new crypto lending service for institutional clients in the U.S. to fill the gap that troubled firms like Genesis and BlockFi left.
- The service allows institutional clients to lend money, primarily in crypto assets, with collateral exceeding the loan value, similar to a prime brokerage service in traditional finance.
- Unlike its canceled Lend program for retail customers, this service targets institutions and operates under less stringent regulations aimed at sophisticated large investors.
Leading cryptocurrency exchange, Coinbase has introduced a crypto loan business aimed at institutional investors in the United States. According to a Bloomberg report published on Tuesday, the most prominent American exchange is attempting to fill the void left by the failure of crypto lending organizations such as BlockFi, Genesis Global, Celsius, and others.
Coinbase Lending Service Launches With Huge Investment
According to Bloomberg, the Coinbase loan program is off to a promising start, with Coinbase customers investing $57 million. This information was released in a Securities and Exchange Commission filing in the United States.
The Coinbase lending service enables institutional clients to lend capital to exchanges in the form of crypto assets.
These assets are collateralized by other digital assets of greater value, which protect against any market losses.
With these funds, Coinbase then lends these assets to other institutional clients.
Furthermore, Coinbase’s new product allows its customers to lend cryptocurrency in an arrangement that the exchange claims meets the requirements of Regulation D under U.S. securities regulations.
To put it another way, Coinbase can raise funds for its lending program by selling equities or securities without having to register these assets with the Commission.
Interestingly, this is not Coinbase’s first foray into the cryptocurrency lending industry.
The American crypto exchange planned the launch of the Lend function in June 2021, allowing retail investors to earn a 4% APY by investing in USDC, which other verified users may borrow.
However, due to multiple legal concerns from the SEC, the exchange was forced to abandon the project in September 2021. Coinbase also discontinued its Borrow function, which allowed customers to borrow monies using Bitcoin as security, in May 2022.
Is Crypto Lending Increasing?
In other news, with the advent of significant crypto firms, the crypto loan industry has maintained its comeback from last year. In addition to Coinbase, the Bitget crypto exchange has announced the launch of its crypto loan business in July 2023 to lure consumers who are dissatisfied with the existing lending system.