- Beginning on May 10, Coinbase will discontinue its Borrowing services.
- There is no threat for present Coinbase Borrow users, and they are not required to take any action to avoid having their positions cancelled.
The most renowned cryptocurrency exchange by volume in the United States, Coinbase, has stated that it will stop offering its lending service, Coinbase Borrow, as of next week.
In a Wednesday email to clientele that was circulated on Twitter, the company stated that “customers will not be able to take out new loans with Coinbase Borrow” as of May 10, 2023.
According to Bloomberg, Coinbase Borrow offers loans up to $1 million against Bitcoin as collateral, but only in some U.S. jurisdictions. Members of Coinbase can borrow up to 40% of the worth of the Bitcoin in their accounts, according to the company’s website. In addition, the loans have an 8.7% yearly interest rate.
The announcement was released just days after the exchange announced plans to move forward with a global derivatives platform in light of the legal challenges the bitcoin industry is facing in the US. The Coinbase International Exchange (CIE), a new commercial platform for trading cryptocurrency derivatives, was introduced by Coinbase on May 2.
“The outstanding loans won’t be affected, and right now, nothing needs to be done.”
According to a snapshot of the email shared on Twitter, the company stated that users will still have access to their loan history and the complete Borrow dashboard.
Uncertainty exists regarding the precise number of eligible individuals who used the Borrow program.
The announcement comes amid a regulatory spat between Coinbase and the Securities and Exchange Commission, which sent the exchange a Wells notice in March regarding “viable infringements of securities laws.”
Some believe that the decision to stop Coinbase’s Borrow program is unrelated to any regulatory action that is currently pending or being implemented. It might, however, be connected to a review of Coinbase’s financial model given that its stock price has dropped by almost 30% over the last three weeks.
The service’s support duration has been rather brief. It was set in action in November 2021 in order to assist consumers who required rapid cash without having to cope with potential tax implications from selling Bitcoin directly. But soon after the launch, the crypto winter began.