In the wake of hindrances encountered by firms like Genesis and BlockFi, Coinbase, has unwrapped a crypto-lending service custom-made for its institutional clientele in the United States. This initiative, intended to bridge the service gap in institutional crypto-lending, was subtly divulged via an SEC filing on September 1.
The filing reveals that Coinbase is seeking exemptions for this pursuit under an existing affiliate, Coinbase Credit, Inc., and recognizes Coinbase’s CFO, Alesia Haas, as a related party. It’s intriguing to note that clients on board with Coinbase’s Prime service, a prime brokerage platform that facilitates trades as well as secure asset storage, have so far pooled $57 million towards the lending program.
A spokesperson from Coinbase on September 5 stated that the company was introducing a digital asset lending program for its institutional Prime clients. This service, robustly covered by Regulation D exemption, allows institutions to advance their digital assets, predominantly cryptocurrencies, to Coinbase under standardized clauses.
The Regulation-D safeguard allows companies to vend securities within specific guidelines sans registration with the SEC. It allows clients to provide funds, primarily crypto assets, and receive collateral exceeding the value of the loan. Such over-collateralization serves as a security blanket.
But why is Coinbase dabbling in crypto-lending? It’s aiming to reshape a financial system that’s been around for over a century, using crypto as a tool to grant people more economic autonomy and opportunity. It’s building the most trusted crypto products and services and bolstering a community of crypto innovators.
Worth noting is that previous endeavors by Genesis and BlockFi to provide similar lending services triggered significant losses and bankruptcy filings for the two firms. Has Coinbase learned from their fallouts?
Coinbase has indeed made prior attempts to roll out distinctive lending programs. It previously offered a Borrow service that allowed retail clients to secure cash loans by pledging Bitcoin as collateral, and had plans for an interest-bearing Lend Program which unfortunately got retracted due to legal repercussions from the SEC in September 2021.
While the push towards a crypto-centric future seems lucrative and promising, it’s also surrounded by regulatory uncertainties and the possible financial quagmire it can lead investors into. As Coinbase navigates this new avenue, the fate of its latest lending service hangs to whether it can sidestep the pitfalls that struck its predecessors.
Source: Cryptonews
