Coinbase Introduces Crypto Loan Service For US Institutions

Prominent crypto exchange Coinbase has launched a crypto lending service targeted at institutional investors in the United States.  According to a Tuesday report by Bloomberg, the largest American exchange seeks to fill the void created by the collapse of crypto lending firms such as BlockFi, Genesis Global, Celsius, etc. 

Coinbase Lending Service Opens With Massive Investment 

Based on Bloomberg’s report, the Coinbase lending program is off to a good start, attracting $57 million in investment from Coinbase customers. This information was revealed in a US Securities and Exchange Commission filing. 

The Coinbase lending service allows institutional clients to lend funds – in the form of crypto assets – to exchange. 

These assets are collateralized by other digital assets, with a higher value protecting against possible market losses. With these funds, Coinbase then offers loans to other institutional clients. 

In addition, Coinbase’s new product allows its clients to lend cryptocurrency in an arrangement that the exchange claims qualifies for Regulation D exemption under US securities laws. 

For context, this means that Coinbase can raise capital for its lending program by selling equity or securities without needing to file a registration of these assets with the Commission.

Interestingly, this new service does not represent Coinbase’s first venture into the crypto lending space. 

In June 2021, the American crypto exchange proposed the introduction of the Lend feature designed to allow retail investors to earn an APY of 4% by investing in USDC, which other verified customers can borrow.  

However, the exchange had to terminate the project in September 2021 due to several legal objections from the SEC. In May 2022, Coinbase also pulled the plug on its Borrow feature, which allowed users to borrow funds using Bitcoin as collateral. 

Crypto Lending On The Rise?

In other news, the crypto lending space maintains its recovery from last year with the influx of major crypto players. In addition to Coinbase, the Bitget crypto exchange recently launched its crypto loan service in July 2023, aimed at attracting customers frustrated with the traditional lending system.

Meanwhile, Blur, the most significant non-fungible token (NFT) marketplace by trading volume, launched Blend, a peer-to-peer lending service designed to allow users to borrow ETH using NFTs as collateral. 

In addition, some bankrupt digital asset lenders have recorded significant progress in settling creditors’ claims. 

In August, Bitcoinist reported that BlockFi had recently received conditional approval for its bankruptcy plan. Genesis Global and its parent company, Digital Currency Group (DCG), had agreed with Genesis customers, which could result in the recovery of up to 90% of specific claims.

Total crypto market cap valued at $1.028 trillion on the hourly chart | Source: TOTAL chart on Tradingview.com

Featured image from CoinMarketCap, chart from Tradingview