Coinbase Launches Crypto Lending Service

Coinbase Prime, a new crypto lending service for institutional investors, fills gaps in the market and offers a full-service prime brokerage platform.

Sep 6, 2023 - 14:25
Sep 15, 2023 - 14:50
Coinbase Launches Crypto Lending Service
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Coinbase, a leading cryptocurrency exchange, has recently launched a new crypto lending service specifically designed for institutional investors. Named Coinbase Prime, this platform aims to fill the gaps in the crypto lending market and offers a full-service prime brokerage platform for institutions. 

Coinbase Prime was quietly introduced to U.S. investors on September 5, according to a Bloomberg report. The platform allows institutions to execute trades and custody assets. It comes with a unique feature: Institutions can lend their digital assets to Coinbase under standardized terms. This product qualifies for a Regulation D exemption, as stated by the company.

According to a filing with the U.S. Securities and Exchange Commission (SEC), the lending program has already attracted significant interest. Since its first sale on August 28, Coinbase customers have invested $57 million in the program. As of September 1, the offering had attracted five institutional investors. The Regulation D exemption indicates that Coinbase has taken steps to ensure the platform complies with existing financial regulations.

SEC filing by Coinbase Credit

The announcement arrives following a period in which the U.S. Securities and Exchange Commission (SEC) accused Coinbase of purportedly providing and selling unregulated financial instruments related to its crypto staking services. These services enable users to generate returns by lending their cryptocurrency to the platform. Coinbase contested the SEC's claims, maintaining that it fundamentally disagreed with the notion that its staking offerings constituted securities.

Subsequently, Coinbase had to temporarily halt its staking operations in four U.S. states—California, New Jersey, South Carolina, and Wisconsin—during the ongoing legal process.

It's worth noting that this new lending product follows the suspension of new loan issuance on Coinbase Borrow in May 2023. The new institutional program operates through Coinbase Credit, the same entity that managed Coinbase Borrow. The program is designed to allow users to receive up to $1 million through Bitcoin as collateral.

The crypto lending industry faced a significant crisis last year, leading to the bankruptcy of major companies like BlockFi, Celsius, and Genesis Global. This was mainly due to a lack of liquidity caused by the bear market of 2022. Coinbase Prime is a response to these challenges, aiming to offer a more stable and reliable platform for institutional lending.

Coinbase has always aimed to revolutionize the financial system, leveraging crypto to provide more economic freedom and opportunities to people. With the launch of Coinbase Prime, the company is taking another step toward achieving this goal. According to a company spokesperson, Coinbase is committed to building the most trusted crypto products and services and aims to bring 1 billion people into the crypto world.

Philip Bohmer Philip is a seasoned journalist that brings clarity to the complex world of cryptocurrencies through his articulate and insightful articles. His passion for blockchain technology fuels his writing, making him a trusted voice in the rapidly evolving digital currency landscape.