Coinbase, a popular cryptocurrency exchange, recently announced the discontinuation of new loans through its Borrow service. This product permitted certain United States customers to utilize their cryptocurrencies as collateral to receive cash loans. From May 10, customers won’t be able to access new loans through Coinbase Borrow. However, the exchange clarified that outstanding loans would remain unaffected, and customers need not take further action.
Without providing a concrete reason, a Coinbase spokesperson mentioned that they continuously evaluate and prioritize their product offerings based on customer preferences. It’s pertinent to mention that the Borrow service allowed users to borrow against up to 40% of their Bitcoin holdings, with a limit of $1 million. Furthermore, the service didn’t require a credit check and charged users an annual percentage rate of almost 9%.
This announcement comes amid a regulatory tussle between Coinbase and the Securities and Exchange Commission (SEC). In March, the exchange received a Wells notice relating to potential violations of securities laws. Additionally, the email was sent to users just before Coinbase’s first-quarter results were set to be announced on May 4.
The situation has led to investment analysts from Citi downgrading Coinbase shares from “buy” to “neutral” ahead of the exchange’s Q1 earnings. Mizuho analysts also maintained their “underperform” rating on Coinbase, citing weak fundamentals and lower average daily trading volumes.
In response to escalating scrutiny of crypto firms in the U.S., Coinbase has launched the Coinbase International Exchange (CIE) derivatives trading platform on May 2, taking its operations global. Though circumstances around regulatory oversight and market performance may influence its trajectory, the discontinuation of the Borrow service raises questions about the platform’s future offerings and the overall crypto landscape.
On one hand, Coinbase’s decision to discontinue issuing new loans might help it focus on other high-priority products that cater to evolving customer needs. Conversely, this decision may be perceived as a setback, potentially hurting the platform’s reputation or limiting users’ access to essential financial services. Thus, the crypto community awaits the announcement of Coinbase’s Q1 results, which might provide further insight into the factors that led to the discontinuation of the Borrow service, and shape the ongoing conversation around crypto’s future.
Source: Cointelegraph
