Coinbase Launches Crypto Lending Service for Institutions

Coinbase Launches Crypto Lending Service for Institutions


Coinbase has introduced a new crypto lending service in the United States, specifically catering to institutional clients. This move by Coinbase is aimed at taking advantage of the gaps left in the crypto lending market following the issues faced by firms like Genesis and BlockFi.

This new platform was revealed in a discreet manner through a U.S. Securities and Exchange Commission filing on September 1st. The filing indicated that $57 million had already been secured for this crypto lending program.

Clients are given the opportunity to lend funds, mainly in the form of cryptocurrencies, through Coinbase. In return, they receive collateral that exceeds the value of the loan. This overcollateralization serves as a protective measure against potential losses.

Coinbase can use these funds to provide secured loans to its institutional trading clients, functioning similarly to the prime brokerage services offered by traditional banks in the world of conventional finance.

Genesis and BlockFi, two firms that offered comparable lending services in the U.S., incurred substantial losses last year, which eventually led them, either fully or partially, into bankruptcy proceedings.

The new lending service introduced by Coinbase is distinct from the controversial Lend program that the company terminated in 2021. The previous Lend program was designed for retail customers, and it faced objections from SEC officials. 

In contrast, this latest lending service is specifically tailored for institutional clients, which implies that the regulatory requirements are less burdensome, assuming that large investors have the requisite sophistication to manage it.

A spokesperson stated that with this service, institutions can choose to lend digital assets to Coinbase under standardized terms in a product that qualifies for a Regulation D exemption. 

Coinbase is working to update the financial system that was built over 100 years ago, leveraging crypto to provide people with more economic freedom and opportunity. To advance this purpose, the company is building the most trusted crypto products and services, and supporting other builders to bring 1 billion people into crypto, he continued. 

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