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Coinbase Shifts to Institutional Lending After Discontinuing Retail Loans

2 mins
Updated by Kyle Baird
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In Brief

  • Coinbase has launched a lending service tailored for US institutional clients, discontinuing its retail lending program.
  • Following the failure of crypto lenders like BlockFi and Genesis, Coinbase is taking a cautious approach to lending.
  • The new service is part of Coinbase Prime, which recently received approval for crypto futures for US retail customers.
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Coinbase Global Inc. has initiated a crypto lending service tailored for large US institutional investors.

This strategic move comes after several crypto lender bankruptcies, including high-profile firms such as BlockFi Inc. and Genesis Global Holdco.

Coinbase Lending Goes After Deep Pockets

The largest US crypto exchange’s Prime customers have already poured $57 million into the lending program, as disclosed in a recent filing with the US Securities and Exchange Commission (SEC). Coinbase Prime, a comprehensive prime brokerage platform, empowers institutions to execute trades and custody assets seamlessly.

On Tuesday, Coinbase clarified that,

“Institutions can choose to lend digital assets to Coinbase under standardized terms in a product that qualifies for a Regulation D exemption.”

Read more: Coinbase Vs Robinhood: Which Is The Best Crypto Platform?

This institutional lending service marks a return to the lending sphere for Coinbase, following its decision in May to cease issuing new loans through Coinbase Borrow, a service tailored for retail investors.

However, the journey has not been without challenges. In June, the SEC charged Coinbase with an unregistered offer and sale of securities related to its staking-as-a-service program. Subsequently, a group of US states demanded that Coinbase halt its staking services.

The crypto industry has been tumultuous, with lenders like Celsius Network, BlockFi, and Genesis Global suffering bankruptcy due to risky bets that didn’t materialize. These failures led to a significant reduction in borrowing and leverage options for investors.

Crypto Commentary

Tuur Demeester, editor-in-chief at Adamant Research, questioned Coinbase’s initiative to venture into lending:

“This ventures into an age-old distinction between lending intermediaries and custodians. Fractional reserve banks mush those two together, a diabolical marriage only sustained by central bank bailouts.”

In another significant development, Coinbase secured approval last month to offer cryptocurrency futures to US retail customers, marking a significant regulatory victory. 

Read more: What are Perpetual Futures Contracts in Cryptocurrency?

Furthermore, Coinbase Global has increased and extended a debt tender offer, following an offer sweetening with discounted prices last month. The San Francisco-based cryptocurrency exchange has increased the offer to $180 million from $150 million for its outstanding 3.625% senior notes maturing in 2031, extending the expiration date to September 18.

Ryan Selkis, CEO of Messari, believes that this is a positive initiative that has yet to be reflected on Coinbase’s stock, COIN:

“Coinbase buying back debt at a steep discount and co-founders repurchasing huge positions of shares, but markets still bearish? TradFi doesn’t understand crypto.”

Coinbase COIN Stock Price Chart. Source: TradingView
Coinbase COIN Stock Price Chart. Source: TradingView

Coinbase’s strategic moves signal a robust response to the challenges and opportunities in the crypto lending space. The firm is reinforcing its commitment to provide diversified offerings to its institutional clients.

Top crypto platforms in the US | December 2023


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BeInCrypto Team
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