Coinbase, cryptocurrency exchange, Borrow services, Bitcoin backed loans, US clients, cash loans, security, existing debt, Wells notifications, Securities and Exchange Commission,
XCryptocurrency exchange Coinbase has decided to suspend issuing new loans through its Borrow service, a tool that allows selected US clients to pledge cryptocurrencies as collateral in exchange for a cash loan.
Coinbase Borrow customers were notified in an email sent on May 3 that they will no longer be able to apply for new loans starting May 10. The emails were posted on Twitter by those who received them.
The customer is not required to take any action, it is stated, and will have no effect on existing debts. Why Coinbase turned off Borrow is not yet known to the public. A Coinbase representative said: “We regularly evaluate our products to ensure we are prioritizing the offers our customers care about the most.”
With a limit of $1 million, the program allows customers to borrow money from the exchange for up to 40% of their $29,089 Bitcoin holdings. Users pay a little under 9% annual percentage rate for this service, and no credit check is required.
The disclosure comes amid a legal battle between Coinbase and the Securities and Exchange Commission (SEC), which issued Wells’ notice to the exchange in March of “possible securities law violations.”
The notification to consumers comes ahead of the release of first-quarter earnings, which are expected on May 4. Ahead of the stock’s Q1 results, Citi investment analyst downgraded Coinbase’s stock from “buy” to “neutral.” According to analysts from Mizuho, ”Coinbase fundamentals remain weak” as average daily trading volume diminishes, and the company maintains an “underperforming” rating on the platform.
Coinbase made the decision to expand its exchange earlier this week, introducing derivatives trading platform Coinbase International Exchange (CIE) on May 2 despite what appears to be a crackdown on crypto firms in the US.