Coinbase introduces crypto lending service for US institutional investors

Coinbase aims to expand its bond buy-back program from $150 million to $180 million.
Coinbase’s previous crypto lending service, Coinbase Borrow, catered to retail investors.
The SEC filed charges against Coinbase related to its staking-as-a-service program.

The crypto lending industry has faced significant setbacks in the past year due to the downfall of major players such as Genesis Global and BlockFi. Seizing the opportunity created by this market gap, Coinbase Global has introduced its own crypto lending service specifically designed for institutional investors based in the United States.

According to a recent submission to the US Securities and Exchange Commission (SEC), clients of Coinbase Prime, the exchange’s comprehensive Prime brokerage platform for institutions to conduct trading and safeguard their assets, have already committed over $57 million to the lending initiative.

In an announcement released on Tuesday, the cryptocurrency exchange stated, “With this service, institutions can choose to lend digital assets to Coinbase under standardized terms in a product that qualifies for a Regulation D exemption”.

Coinbase has decided to increase its bond buy-back program from an initial cap of $150 million to a substantial $180 million.

This expansion comes on the same day as Coinbase’s announcement of the buy-back initiative, which initially received a lukewarm response but has now garnered additional resources.

Coinbase’s History in Crypto Lending

Coinbase’s foray into the lending sector isn’t entirely new. In May, the company halted its service, Coinbase Borrow, which enabled individuals to borrow against their Bitcoin holdings, primarily targeting retail investors.

The current institutional lending program operates under the same entity, known as Coinbase Credit.

Regulatory Challenges

However, Coinbase’s journey hasn’t been without hurdles. In June, the US Securities and Exchange Commission (SEC) filed charges against Coinbase regarding its unregistered offer and sale of securities tied to its staking-as-a-service program.

This program allowed users to delegate their coins to Coinbase to earn yields while securing blockchain networks. A coalition of US states demanded the cessation of Coinbase’s staking services in response to these charges.

Crypto Lending Industry Challenges

Notably, the crypto lending sector has faced considerable turbulence in the past year, with platforms like Celsius Network, BlockFi, and Genesis Global encountering financial difficulties.

These lending platforms engaged in high-risk strategies that ultimately proved unfavourable, leading to a chain reaction of failures that significantly reduced borrowing options and leverage for investors.

Coinbase’s entry into the institutional crypto lending space may provide a fresh perspective and solutions in a market seeking stability and reliability.