Coinbase To Shut Down Bitcoin Borrow Service• May 4, 2023 6:39 pm • Comments
Coinbase just announced that it will be shutting down its crypto lending service, Coinbase Borrow, sometime next week.
The reason why they decided to discontinue the serve has not been officially stated, but it is quite clear for speculators that the reason is likely because of regulatory challenges.
Coinbase has stated that they will stop issuing new loans starting May 10, but this change will not affect current users who already have active loans.
This service was launched back in November 2021 which essentially allowed users to borrow capital by using BTC as collateral.
Recently, a lot of crypto lending and loan services have shut down due to market conditions and uncertain regulations.
— CoinDesk (@CoinDesk) May 4, 2023
Launched in November 2021, Coinbase Borrow allows users from certain U.S. states to borrow up to $1 million using Bitcoin (BTC) as collateral.
Customers can borrow up to 40% of the value of the Bitcoin in their accounts at an annual interest rate of 8.7%, according to the exchange’s website.
In Coinbase’s case, the Wells Notice alleged that the company’s staking products constitute unregistered securities, while also mentioning several other aspects of the exchange’s activities, including the Coinbase Wallet.
In response to the SEC’s Wells Notice, Coinbase stated it does not list securities, its Coinbase Wallet product does not constitute a broker, and the exchange’s staking services have nothing to do with a securities offering.
On the other hand, Coinbase has already launched an international exchange that operates outside of the US.
There is the possibility that crypto lending services could be added to this new exchange sometime in the future, but there has been no official confirmation as of now.
So far, the only thing that is known is that the new exchange will offer Bitcoin and Ethereum futures where the trades will be settled in the USDC stable coin.
It is unsure if Coinbase will ever decide to relaunch this borrowing service in the future.
Many within the crypto industry that crypto lending services will potentially be a high growth market in the future as traditional lending services are not easily accessible in some regions in the world.
BREAKING: #Coinbase announced in a shocking notice to its users that beginning on May 10, 2023, Coinbase will be abruptly terminating its Coinbase Borrow service that allowed users to take out fiat loans with cryptocurrencies set as collateral. pic.twitter.com/3ZjcudDiy5
— The Cardano Times (@TheCardanoTimes) May 3, 2023
Several cryptocurrency organizations, alongside Coinbase, are facing regulatory pressure from the US SEC over potential violations of securities laws.
One such company is a decentralized exchange platform, SushiSwap.
A report on March 21 disclosed that the exchange received an order from the SEC requesting information about its decentralized exchange, which it suspected could result in regulatory enforcement action.
Another prominent example is the ongoing SEC-Ripple lawsuit over offering XRP without registering it as a security.
Notably, this case has been on since December 2020, causing the XRP price to fall drastically. The community awaits the summary judgment anxiously, as it will affect the entire industry.
But despite the regulatory pressure, many in the crypto industry remain optimistic about the future of digital assets.
🔔 Coinbase will stop issuing Bitcoin-backed loans from May 10th.
◾The program allowed users to borrow up to $1 million in cash using #bitcoin as collateral.
— ChainDustry (@ChainDustry) May 4, 2023
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