Coinbase cajoles institutional market with new crypto lending service

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Coinbase is launching a cryptocurrency lending platform targeted at U.S. institutional investors, aiming to fill the gap left by lending companies that collapsed during the industry’s crisis last year.

The new lending service permits institutions to loan out digital assets under standardized terms and is structured to qualify for a Regulation D exemption, which allows for capital raising without full SEC registration, Coinbase reportedly said.

Users of Coinbase’s Prime service have already invested $57 million in the new lending program, according to a Sept. 1 regulatory filing signed by CFO Alesia Haas.

Crypto exchanges incorporate lending services into their operations for multiple strategic objectives. 

Such services augment revenue channels beyond transaction fees, and also enhance customer retention by delivering a broader suite of financial solutions on a single platform.

Blockworks has reached out for comment.

This move comes about three months after the SEC sued Coinbase for allegedly functioning as an unregistered exchange and not registering its cryptoasset staking service.

The SEC claimed that Coinbase’s failure to register deprived investors of key protections, including SEC scrutiny, obligatory record-keeping and mechanisms to mitigate conflicts of interest.

Despite ongoing legal challenges, the National Futures Association recently granted the exchange permission to provide eligible US clients with direct access to crypto futures through its platforms.

Coinbase recently decided to phase out its prior lending service, Coinbase Borrow, citing low user engagement. 

The Borrow service allowed individual users to leverage up to 40% of their bitcoin holdings to secure fiat loans of up to $1 million, with an 8.7% annual interest rate.

In July, the exchange announced that existing loan holders must clear all outstanding balances by Nov. 20.

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