- Coinbase is set to discontinue offering new loans through its Coinbase Borrow service.
- The program will stop accepting new loan requests from customers after May 10.
- Users were able to borrow up to $1 million without undergoing a credit check as long as they used Bitcoin as collateral.
San Francisco-based cryptocurrency exchange, Coinbase, has announced that it will be discontinuing the issuance of loans through its program, Coinbase Borrow. The company informed its customers that as of May 10, 2023, they will no longer be able to take out new loans through the platform.
In an email to its customers shared on Twitter, Coinbase stated:
“There is no impact on your outstanding loans, and no action is required at this time. You will continue to have access to your loan history and the full Borrow dashboard.”
The company did not provide the reason for the discontinuation. However, it could be due to regulatory concerns or a lack of popularity.
Coinbase is one of many companies to shut down its lending service. Other major cryptocurrency companies, such as BlockFi and Celsius, have faced regulatory scrutiny over their lending products.
Despite the discontinuation of the Coinbase Borrow program, the company will still offer its customers a range of other services, including trading and custody of cryptocurrencies.
Coinbase launched Coinbase Borrow in November 2021. The service was only available to Coinbase users in certain states within the United States and allowed them to borrow up to $1 million in fiat loans from the exchange. Users could use up to 40% of their Bitcoin account holdings as collateral for the loan. The program did not require a credit check and charged users an annual percentage rate of 8.7%.
The program’s purpose was to provide users with quick access to fiat loans without selling their Bitcoin, which could result in taxable gains or losses. By allowing users to use their Bitcoin as collateral, Coinbase Borrow aimed to provide a more flexible borrowing option for cryptocurrency investors.
The discontinuation of the Coinbase Borrow program is taking place amidst a dispute between the exchange and the US Securities and Exchange Commission (SEC). In March, the SEC issued Coinbase with a Wells notice, which is a warning of a potential enforcement action. Following this, Coinbase filed a lawsuit against the SEC in April 2023, seeking an apparent response to a rulemaking petition submitted in July 2022. The petition requested more precise regulatory guidelines for the cryptocurrency industry and answers to 50 specific questions regarding digital assets.
The ongoing regulatory tensions between Coinbase and the SEC were one of the reasons why Coinbase expanded its operations outside of the United States. On Tuesday, the company launched the Coinbase International Exchange (CIE), based in Bermuda. The platform allows institutional users to trade BTC and ETH perpetual futures with a 5x leverage.
The launch of CIE demonstrates Coinbase’s desire to continue expanding its business despite regulatory challenges. By operating in Bermuda, the company can avoid some of the regulatory restrictions it faces in the United States. Additionally, offering leveraged futures trading allows Coinbase to diversify its revenue streams and appeal to institutional investors.
Coinbase has been in close collaboration with the SEC to ensure that its operations adhere to current regulations. The decision to stop providing new loans on Coinbase Borrow highlights the difficulties that cryptocurrency lending companies face when navigating intricate regulatory frameworks. As the sector grows and changes, businesses must adjust to maintain consumers’ trust and follow applicable legislation.
