Cryptocurrency exchange Coinbase has introduced a new lending service targeted at institutional investors in the United States. The move is seen as an attempt by Coinbase to take advantage of the recent failures and liquidity issues in the crypto lending market.
According to a report by Bloomberg, Coinbase has quietly launched Coinbase Prime, an institutional-grade lending platform. This platform allows institutions to execute trades and store assets while also offering a lending service. Coinbase stated that institutions can choose to lend their digital assets to Coinbase under standardized terms, following regulatory guidelines.
Coinbase customers have already invested a total of $57 million in the lending program, according to a filing with the U.S. Securities and Exchange Commission. This amount was raised through the first sale on August 28 and has attracted five investors as of September 1.
Coinbase Credit, the entity that manages Coinbase Borrow, is also responsible for operating the new institutional lending program. Coinbase Borrow, a service that allows users to receive loans of up to $1 million with Bitcoin as collateral, halted the issuance of new loans in May 2023.
This latest announcement comes after the U.S. SEC recently charged Coinbase for the alleged offering and sale of unregistered securities related to its crypto staking services. Coinbase, however, vehemently disagreed with the SEC’s allegations and temporarily paused its staking program in California, New Jersey, South Carolina, and Wisconsin while the legal proceedings continued.
The crypto lending industry faced significant challenges and collapses in the previous year. Companies like BlockFi, Celsius, and Genesis Global went bankrupt due to a lack of liquidity caused by the bear market in 2022. In light of these failures, experts and crypto enthusiasts have emphasized the need for the sector to address issues related to short-term assets and liabilities.
The introduction of Coinbase Prime aims to provide institutional investors with a reliable and regulated platform for crypto lending. Coinbase’s entrance into the lending market could potentially help restore confidence in the industry by offering institutional-grade services and standardized terms.
Coinbase’s move into the lending market reflects the company’s ongoing efforts to expand its offerings and cater to the growing demand for crypto financial services. As the crypto industry continues to evolve, it is likely that more exchanges and platforms will explore opportunities in lending and other financial products.
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