The largest US crypto exchange Coinbase released a statement on Wednesday disclosing the halt of Coinbase Borrow, a service that allows the exchange to issue cash loans to US customers as they post BTC as collateral.
The firm plans to stop issuing the new Bitcoin-backed loans effective on May 10. It added that the action would not affect customers’ outstanding loans already running on the platform. So, such users will still repay their loans in line with the agreed loan duration.
Coinbase Reached Decision During Product Evaluation
Coinbase Borrow is available only in some states in the US and it allows users to borrow loans up to $1 million while using Bitcoin as collateral. Moreover, there’s no credit check for borrowers.
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The service enables users to borrow cash loans to about 40% of the value of their BTC holdings. The service repayment schedule takes 8.7% as the annual interest rate from users.
According to Bloomberg’s report, the exchange spokesperson mentioned that the firm regularly evaluates its products and such regular checks help the exchange to prioritize its services according to customers’ preferences.
However, as of press time, the crypto exchange is yet to disclose the reason for the sudden halt of its Borrow service.
Coinbase On Regulatory Radar
Coinbase’s decision to discontinue its Borrow service is coming amid increasing regulatory scrutiny around the firm. The exchange seems to be watched closely by the US Securities and Exchange Commission (SEC) over the last few months.
In March, the SEC sent a Wells Notice to Coinbase regarding its staking and asset listings. While disclosing the notice, the CEO, Brian Armstrong, noted that the regulator could follow up the notice with an enforcement action.
Armstrong further revealed that the exchange requested the SEC to identify the listed assets on its platform, which they classify as securities. However, the regulator didn’t respond to that.
Also, a Bloomberg report in April disclosed the exchange’s interest in moving offshore. CEO Ben Armstrong mentioned the possibility of moving out from the US during the Fintech Week in London.
Armstrong stated that the US has the potential to expand the crypto market. However, the country lacks regulatory clarity to support such a move. So, he said that the exchange might seek a better option in other countries offering more friendly regulations if nothing changes in the US’s regulatory stance.
On May 2, the exchange launched its derivatives trading platform Coinbase International Exchange. The launch was part of its plan to set a global footprint in the industry.
Featured image from Pixabay and chart from Tradingview.com