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Coinbase New Loan To Stop Operations Next Week

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The largest cryptocurrency exchange in the United States announced that it would dismiss its lending product Coinbase Borrow.

Coinbase borrow, which enabled users to take out loans of up to $1 million in exchange for Bitcoin collateral, will cease effectively on May 10.

What could have been the Cause?

As per the company’s spokesperson, the lending product brings little interest to account for allocated funds.

The decision to stop Coinbase Borrow resulted from a re-evaluation of the firm’s prioritization of lending products provided to the public.

Just like in the case of Coinbase Pro, which stopped operations last summer, the organization feels that allowing Coinbase Borrow to exist is a bit excessive.

According to the company, the measure taken by the firm will not affect the customer’s outstanding loans.

READ ALSO: BitFlyer Receives Penalty for Violating Laws by NY Regulator

Will This Action Affect Customers?

As stated by the announcement, the customers are not required to take any action to prevent the closure of their positions.

Moreover, the current users of the lending product won’t record any adverse effect from the exchange’s action.

In addition, customers can still take out loans until May 10.

After that date, the company will reject any new loan attempt to exchange with Bitcoin as collateral, says the company.

However, every other existing loan contract will be allowed to full term, after which Coinbase Borrow will be shut down completely.

Unfortunately, the lending service only had a short life span. It was only launched in November 2021 to support users needing quick cash.

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Through this service, the users never needed to deal with taxation problems which may have risen due to selling Bitcoin directly.

But then, a short time after its launch, the cryptocurrency winter set in, which caused the cryptocurrency market to crash.

As a result, fewer and fewer users started to take advantage of the lending service. This led to the company deciding to stop its support for the program.

Did the Regulators cause the Decision?

The company’s decision to stop the operations of the Coinbase Borrow wasn’t related to any regulatory action, enforced or pending.

However, the action may be connected to the company’s financial model review, whose stock worth has contracted by almost 30% over the past three weeks.

According to the Chief Executive Officer, Brian Armstrong, the company will make its quarterly report on May 4 amid the back-and-forth with regulators such as the Securities and Exchange Commission.

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