With an aim to capitalize on the previous unmet demands of the crypto lending market, renowned cryptocurrency exchange, Coinbase, has launched an institutional-grade crypto lending service, Coinbase Prime. Only available to US institutional investors, the newly launched platform offers a full array of prime brokerage services including digital asset execution and custody.
According to Coinbase, institutions can opt to offer their digital assets for lending under standardized terms, announced via a statement. This offering, the company maintains, is compliant with Regulation D exemptions. Already, $57 million worth of investments have been channeled into the lending program, according to filings with the US Securities and Exchange Commission.
However, despite the initial high adoption rate, the new institutional lending service isn’t immune to skepticism and challenges. Earlier this year, Coinbase had to halt the issuance of new loans on its Coinbase Borrow platform. Moreover, the crypto lending industry experienced a substantial hit last year when prominent companies like BlockFi, Celsius, and Genesis Global fell into bankruptcy due to liquidity issues in 2022’s bear market.
Furthermore, Coinbase finds itself dancing with regulatory authorities over its crypto starking services, following an allegation of offering and the sale of unregistered securities by the US SEC. Perhaps, learning from past mistakes in short-term asset and liability handling could paint a brighter future for this crypto lending service.
Coinbase isn’t just facing challenges from regulators, but also potential fallout from the crypto community. Some crypto enthusiasts have called for transparency and better-risk handling strategies in the crypto lending sector after experiencing significant losses in 2022. This hint of skepticism from key industry players could affect how readily these institutional investors adopt the new offering.
With the ambitious yet potentially tricky path, Coinbase seeks to tread, it remains crucial for the company to recognize and address these liabilities swiftly, even as they make efforts to gain the confidence of institutions and compete amidst other potential players in the lending sector. How they straddle the regulatory landscape and cater to the safety of investors may ultimately decide how successful their new endeavor becomes or if they follow in the footsteps of their predecessors who fell into bankruptcy due to lack of liquidity.
Source: Cointelegraph
