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Coinbase has announced the phasing out of its lending service, Coinbase Borrow. The decision comes after a suspension of new loan applications initiated in May, according to a July 20 announcement:
“Coinbase announced that we will begin the gradual process of closing Coinbase Borrow. Customers are unable to obtain new lines of credit against their crypto, and existing Coinbase Borrow customers will have until November 20, 2023 to repay their existing loans.
Once an important part of Coinbase’s wallet, Coinbase Borrow had enabled users to secure fiat loans of up to $1 million, using up to 40% of their Bitcoin holdings as collateral. The service carried an annual interest rate of 8.7%.
Coinbase cited low adoption of the service as the main reason for its decision. The exact number of users affected by this move, however, has not been disclosed.
As the cryptocurrency platform redirects its attention, existing loan holders have been given until November 20 to clear any outstanding balances. Failure to repay loans by the due date will result in Liquidation of BTC Collateral by Coinbase to recover debts.
To facilitate a seamless transition, Coinbase is offering affected customers priority customer support through its service, Coinbase One. Users will retain access to their loan history and loan dashboard until May 1, 2024, as detailed in an email sent to users:
“We are also waiving the typical 2% liquidation fee if you choose to use your BTC collateral to pay off the loan or take no action and we sell the BTC for you.”
A Reddit thread showed the surprise of the program ending, with some speculating about market conditions as the real reason.
One Redditor stated in the thread that, “they [Coinbase] you have a history of moving too quickly and overlooking critical details of launches that could be detrimental to your security or customer satisfaction.”
The shutdown of Coinbase Borrow comes amid regulatory scrutiny of the platform’s services. The SEC accused Coinbase in June of operating as an unregistered securities exchange and failing to register the offering and sales of its cryptoasset share-as-a-service program.
However, Coinbase has not attributed the SEC’s charges to the termination of its Borrowing program.