Coinbase, a prominent cryptocurrency exchange, has taken a strategic step by introducing a cryptocurrency lending service catering specifically to institutional investors within the United States.
This move is aimed at capitalizing on the significant disruptions and failures that have plagued the cryptocurrency lending market in recent times.
The platform, which offers institutional-grade services, is now accessible to U.S. investors as part of Coinbase’s existing offering, Coinbase Prime.
A Coinbase spokesperson confirmed this development on September 6, emphasizing the company’s dedication to revolutionizing the financial system and expanding economic freedom through cryptocurrency.
Under this newly launched digital asset lending program, institutional clients can opt to lend their digital assets to Coinbase under standardized terms, thereby qualifying for a Regulation D exemption.
According to documents filed with the U.S. Securities and Exchange Commission, the lending program attracted investments totaling $57 million from Coinbase customers, with the first sale occurring on August 28. By September 1, five investors had already participated in the program.
This initiative comes on the heels of Coinbase’s suspension of new loan issuance via Coinbase Borrow back in May 2023.
The previous program allowed users to borrow up to $1 million with Bitcoin (BTC) collateral.
Notably, this new institutional program operates through Coinbase Credit, the same entity responsible for managing Coinbase Borrow.
This development follows closely behind the U.S. Securities and Exchange Commission’s allegations against Coinbase, accusing the platform of offering and selling unregistered securities in connection with its crypto staking services.
These services allowed users to earn yields by staking their crypto assets with the platform.
Coinbase strongly contested these allegations and temporarily suspended its staking program in four states (California, New Jersey, South Carolina, and Wisconsin) while legal proceedings unfolded.
The cryptocurrency lending sector encountered severe challenges last year, with prominent companies like BlockFi, Celsius, and Genesis Global facing bankruptcy due to liquidity issues stemming from the 2022 bear market.
These setbacks prompted calls for the industry to address issues related to short-term assets and liabilities, emphasizing the need for valuable lessons to be learned from these failures.
Coinbase’s entry into the crypto lending arena for institutional investors reflects its ambition to offer a reliable and secure solution in a market that has experienced significant turbulence.
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