Coinbase, one of the world’s leading cryptocurrency exchanges, has announced that it is set to stop issuing new Bitcoin-backed loans through its Borrow service. The move is part of a broader restructuring effort by the company, which seeks to focus on its core business of facilitating trades in various cryptocurrencies.
The Coinbase Borrow service, which was launched earlier this year, gave customers an opportunity to borrow dollars against their Bitcoin holdings. The loans were backed by the customer’s Bitcoin collateral, and thus represented a relatively low-risk way for traders to access liquidity without having to sell their Bitcoin.
However, Coinbase announced in an email to customers that it would no longer be accepting new applications for this service, despite the fact that existing loans will continue to be serviced until they are repaid by customers. The company did not provide a specific reason for the change, but it is likely that it is part of a broader effort to focus on its core exchange business.
The decision to end the Borrow service has been met with mixed reactions from the cryptocurrency community. While some have criticized the move as a sign of Coinbase’s lack of confidence in the viability of the service, others have pointed out that the company is simply focusing on its core business in order to provide better service to its customers.
Coinbase has been growing rapidly in recent years, driven by the surge in popularity of cryptocurrencies. The exchange now supports more than 50 cryptocurrencies, and has more than 56 million registered users. However, some critics have suggested that the company has been struggling to keep up with the pace of its own growth, and that it has been stretched thin as a result.
In recent months, Coinbase has been working to streamline its operations and focus more on its core exchange business. Earlier this month, the company announced that it would be suspending its margin trading service, which allows customers to trade with borrowed funds. The move came after the company was criticized for allowing inexperienced investors to take on too much risk by trading with borrowed funds.
Similarly, the decision to end the Borrow service may be seen as a prudent move by Coinbase, given the risks associated with lending against Bitcoin collateral. While the loans were generally seen as low-risk, there is always the possibility that the value of the Bitcoin collateral could decline sharply, putting the lender’s funds at risk.
In any case, it is clear that Coinbase is taking steps to focus more on its core business, and to provide better service to its customers. While some may view the decision to end the Borrow service as a setback, others will likely see it as a positive move by a company that is striving to stay ahead of the curve in the rapidly-evolving world of cryptocurrencies.
Crypto exchange Coinbase has announced that it will stop issuing new loans through its Coinbase Borrow service. The service allows customers in certain US states to use their crypto holdings as collateral to receive cash loans of up to $1 million, against up to 40% of their Bitcoin holdings with no credit check required. However, the company said in an email sent to Borrow customers on May 3 that from May 10, new loans will no longer be available through the service.
While Coinbase has not provided a reason for the closure, a spokesperson for the exchange stated that the firm regularly evaluates its products and only prioritizes those offerings that its customers most care about. The announcement comes amid regulatory scrutiny from the US Securities and Exchange Commission (SEC), which sent Coinbase a Wells notice in March over possible violations of securities laws.
The move to halt new loans through Coinbase’s Borrow service also comes ahead of the exchange’s Q1 earnings report, expected on May 4. Investment analysts have already downgraded Coinbase shares, with Citigroup moving their rating from “buy” to “neutral” and analysts from Mizuho maintaining their “underperform” rating on the firm.
Coinbase has recently moved to take its exchange global by launching the Coinbase International Exchange (CIE) derivatives trading platform on May 2, amidst a crackdown on crypto firms in the US. The company has not said whether the closure of Borrow is related to its wider regulatory issues.
The Borrow service was released in 2020, offering loans at an APR of nearly 9%. Customers using the service do not need to undergo credit checks, but instead offer up their crypto holdings as collateral for the loans. The service initially had a cap of $20,000 for its loans, which was raised to $100,000 in August 2021, as well as allowing customers to use other crypto assets as collateral such as Ethereum and Litecoin.