Coinbase, the US-based crypto exchange, recently announced the termination of its Coinbase Borrow service effective May 10. The service allows users in certain US states to take out fiat loans of up to $1 million without credit checks, by posting up to 40% of their Bitcoin as collateral. The annual interest rate for these loans is 8.7%. While existing loans are unaffected, no new loans will be issued through this service.
This move comes amid what many view as a regulatory crackdown on crypto firms in the US, beginning earlier this year. In March, the US Securities and Exchange Commission (SEC) issued Coinbase with a Wells notice. The company has since sued the SEC, asking the regulator to answer a petition from July 2022 on crypto industry regulation using existing SEC frameworks as a guide. The exchange even launched a non-fungible token (NFT) campaign, “Stand With Crypto,” to promote favorable crypto policies.
Coinbase has not made an official statement regarding the reasons for the closure of its borrowing service, so any connection to regulatory oversight remains speculative. The company has explained its decision by citing an evaluation of its products to ensure customers have access to the offerings they value the most. Intriguingly, the announcement coincides with the recent launch of Coinbase’s global derivatives platform, Coinbase International Exchange (CIE), on May 2.
While some might see this move as a negative consequence of regulatory scrutiny, the subsequent launch of CIE could signify a strategic shift in the company’s focus. This could potentially make the discontinuation of Coinbase Borrow a necessary decision to optimize resources and efforts towards initiatives seen as more beneficial for the business and its customers.
However, there is no denying that regulatory uncertainty may stifle innovation within the crypto industry, as platforms like Coinbase Borrow could face barriers in reaching their full potential. Yet, an increase in regulatory efforts could also provide much-needed clarity and pave the way for a more stable and secure crypto ecosystem in the long run.
Coinbase’s COIN price has not fared well since mid-April, falling by about 30%, currently standing at $48.88, with a 2023 high of $84 in March. The company is expected to announce its first-quarter results on May 4, and it remains to be seen whether the termination of the borrowing service impacts the platform’s overall growth and financial performance.
Source: crypto.news
