Coinbase has recently rolled out a fresh crypto lending service targeted toward institutional clients in the U.S., with a view to taking the place of fallen players, notably Genesis and BlockFi. The initiative, first brought to light in a filing with the U.S. Securities and Exchange Commission on September 1, has already raised over $57 million. Akin to the prime brokerage service rendered by traditional banks, Coinbase clients can lend money, essentially in crypto assets while also offering more collateral than the loan’s worth, adjusted on a daily basis.
Indeed, practices of overcollateralizing are often leveraged as protective measures against unforeseeable predicaments. Coinbasecan then redirect this borrowed money to its institutional trading clients. Notably, Genesis and BlockFi once conducted similar lending services in the U.S., but subsequent heavy losses drove them towards bankruptcy court.
Interestingly, this new service bears no resemblance to the abortive Lend program that Coinbase terminated last year. While the former was reaching out to the everyday consumer, this latest lending service focuses entirely on institutions, suggesting that regulation won’t be as stringent. This is based on an assumption that significant investors possess the knowledge needed to maneuver such programmes.
Concerning the service, a Coinbase spokesperson stated, “Institutions can elect to lend digital assets to Coinbase under standardized terms in a product that is accorded for a Regulation D exemption. Coinbase is continually working to revamp a financial system that’s over a century old, wielding crypto to offer individuals more economic freedom and opportunity.”
Undeniably, the rise of crypto lenders has ignited discussions around the sophisticated world of blockchain technology. However, the earlier failure of the seemingly similar services by Genesis and BlockFi provides a healthy dose of skepticism. Still, Coinbase’s focus on institutional clients with large-scale crypto investments marks a key distinction and could provide a safety net against the issues that plagued their predecessors.
However, some skeptics might worry this new lending service could expose institutions to extra risks due to the volatile nature of crypto assets. While overcollateralization may provide some safety, the rapidly shifting crypto market could cause trouble if collateral values fall quickly. All said and done and in spite of the skepticism, Coinbase seems prepared to charge ahead, buoyed by an unwavering belief in crypto’s power to reshape our financial system.
Source: Coindesk
