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America’s largest crypto exchange, Coinbase, is shutting down its lending program and has given borrowers four months to repay their loans.
Coinbase Will Discontinue Lending Program
The Coinbase Borrow program allows eligible Coinbase customers in certain US states to borrow up to US$1 million by holding bitcoin or other cryptocurrencies as collateral.
Many viewed Coinbase Borrow as an easy way to access cash without having to sell their crypto holdings. Unfortunately, the crypto exchange recently announced that it is discontinuing the program. Current borrowers have four months to repay any outstanding loans before the program closes forever.
according to a company blog postThe update will only affect customers with existing loans with due date after November 20, 2023. After this date, accounts that still have outstanding loans will be paid off by selling enough BTC collateral to cover the full amount of any outstanding loans.
The exchange initially charges a 2% liquidation fee from borrowers who are unable to repay their loans before the due date. However, the exchange said that the liquidation fee would be waived off in this case.
COIN price sitting at $102 | Source: Coinbase Global, Inc. on Tradingview.com
Why is the Exchange program closing?
The shutdown of Coinbase Boro was first announced two months ago. In early May, Coinbase announced May 10 as the last day customers can take out new loans through the program.
Launched in November 2021 during the peak of the crypto bull run, Coinbase’s lending program was advertised as a way to quickly obtain fiat loans without the need to sell bitcoin. With the entire cryptocurrency market now in a calm state, it seems that the lending program is not catching on as much as expected. According to Coinbase, it is making this decision in order to focus on other products. “Offering what our customers care about most.”
“We regularly evaluate our products to ensure we are prioritizing the offerings our customers care about most. After much deliberation, we have made the decision to close Coinbase Boro,” the blog post reads.
Regulatory issues could also play a role in the exchange’s decision. The California-based exchange has been under scrutiny from US regulators for years. The Securities and Exchange Commission (SEC) recently sued Coinbase on June 6 for making billions of dollars in its role as an intermediary for its staking program and alleged trading of unregistered securities.
Cryptocurrency regulations on trading, lending and staking remain unclear. However, Coinbase says that the SEC can only pursue its claims if cryptocurrencies and staking services are established as securities.
Featured Image from CNBC, Chart from Tradingview.com
