Coinbase, the leading cryptocurrency exchange in the United States, has announced that its lending product, Coinbase Borrow, will be phased out on May 10th. The company explained that it was not receiving enough demand for the product to continue allocating resources toward it.
However, the loans would remain active till the end.
No Regulatory Issues
Coinbase’s decision to discontinue its Borrow program is not due to any regulatory action, either pending or enforced, a company spokesperson confirmed. However, analysts opined that it may be related to a broader review of the company’s financial model, as its stock value has decreased by almost 30% in the past three weeks.
The American crypto giant is set to release its quarterly earnings report amidst an ongoing regulatory battle with agencies like the Securities and Exchange Commission (SEC). Recently, the regulator has been taking a critical view of the crypto industry, particularly crypto exchanges.
Hence, its move could impact Coinbase’s earnings and future outlook. According to reports, existing customers of the Coinbase Borrow program will not be affected, and no action is required from them to secure their positions.
Starting May 10th, Coinbase will no longer accept new loan requests in exchange for BTC collateral. But borrowers who have already taken out loans can still hold their positions until their loans expire.
Subsequently, all existing loan agreements will continue until their maturity date. Then, Coinbase will discontinue its Borrow program without definite plans for a relaunch.
Coinbase Reevaluates Product Offerings
A Coinbase spokesperson explained that the company ended the program as part of a more extensive assessment of its product priorities and strategy for offering customer services. Like Coinbase Pro, which was discontinued last year and merged with the central platform, the Coinbase team decided that the existence of Coinbase Borrow was no longer viable based on recent data.
Coinbase launched its Borrow in November 2021, intending to allow users to access cash quickly without the potential tax implications of selling their Bitcoin holdings directly. During its short existence, the program allowed users to take out loans by collateralizing their Bitcoin.
After the service’s launch in November 2021, the crypto market experienced a downturn, commonly called the “crypto winter.” As a result, fewer users utilized the product. Ultimately, Coinbase decided it was best to discontinue the initiative.
In a related development, the top American crypto trading firm announced in April that it had secured an operating license from the Bermuda Monetary Authority. Coinbase has been making significant strides in expanding its reach worldwide.
In addition to the Bahamas, the exchange has established its presence in other countries such as Abu Dhabi, Canada, Brazil, and Singapore. As the company stated in a recent blog post, it is more than halfway through its eight-week initiative to expand internationally.
The ongoing expansion of Coinbase in various countries indicates the company’s efforts to broaden its international presence in the face of increasing regulatory pressure on the crypto industry by US authorities.
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