Coinbase to Stop Issuing Loans Through Borrow Program
- The crypto exchange warned its users in an email that starting 10 May it will no longer issue new loans through its Coinbase Borrow program.
- The service has been operating since November 2021, and allowed customers to use their Bitcoin as collateral to borrow up to $1 million in fiat from Coinbase.
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U.S.-based cryptocurrency exchange Coinbase has warned users that starting next week they will no longer be able to receive loans through its Coinbase Borrow program.
The exchange sent emails to its Borrow customers on 3 May — which was shared on Twitter by its recipients — informing them that no more loans will be issued through its Borrow program starting 10 May. While it did not provide a reason for the move, Coinbase noted that this will have no impact on outstanding loans, and that customers were not required to take any action. A Coinbase spokesperson said in a statement:
“We regularly evaluate our products to ensure we’re prioritizing the offerings that our customers care about most. Effective May 10, we will stop issuing new loans through Coinbase Borrow. There is no impact on customers’ outstanding loans, and no action is required from them at this time.”
Announced in August 2020, and publicly launched in November 2021, the service allowed Coinbase users in select U.S. states to borrow up to $1 million in fiat loans from the exchange against as much as 40% of their Bitcoin (BTC) account holdings. The goal of the program — which required no credit check, and charged users 8.7% annual percentage rage — was to allow users to receive fiat loans quickly without the need to sell their BTC, which could incur a taxable gain or loss.
The closure of the Borrow program comes amid a regulatory scuffle between the exchange and the Securities and Exchange Commission (SEC), which back in March sent Coinbase a Wells notice warning it of a potential enforcement action. The exchange, in turn, filed a lawsuit against the SEC last month in order to receive a yes or no response to a rulemaking petition — asking for clearer regulatory guidelines for the crypto industry, and answer to 50 specific questions regarding digital assets — it had filed back in July 2022.
The ongoing regulatory tensions were a part of the reason why Coinbase expanded outside of the U.S. on Tuesday with the launch of the Coinbase International Exchange (CIE). Based in Bermuda, CIE allows institutional users to trade BTC and ETH perpetual futures with a 5x leverage.
- Initially launched in the U.S., U.K., Germany, and Ireland, Coinbase One offers its subscribers zero-fee trading, improved staking rewards, 24/7 customer support, and more.
- The $29.99 per month service also offers additional benefits through Coinbase’s partnerships, and will be rolled out to 31 additional countries in the coming months.
Coinbase CEO Brian Armstrong speaking at TechCrunch Disrupt SF 2018. Steve Jennings/Getty Images for TechCrunch
- The U.S. SEC claimed in its response that it was under no obligation to issue new regulations for crypto, and that rules for crypto were already published and were sufficient.
- The agency also tried to distance itself from any public comments made by its chair Gary Gensler, particularly regarding his statement that most cryptocurrencies are securities.
- Ishan Wahi was sentenced to 24 months in prison for his illegal use of confidential information he obtained during his time at Coinbase.
- Wahi, his brother, and a friend, had allegedly made around $1.5 million between June 2021 and April 2022 by purchasing digital assets before their Coinbase listing was announced.