At the time of writing, the reasons behind Coinbase's decision are unclear.
Coinbase, an American publicly traded company that operates a cryptocurrency exchange platform, has decided to cease the distribution of new loans via its Borrow service, a platform that allowed US clients to use cryptocurrency as collateral for cash loans.
On May 3rd, the crypto exchange informed Coinbase Borrow customers through an email that, starting May 10th, they would no longer be able to obtain new loans through the service.
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Although the email did not explain this decision, it assured borrowers that outstanding loans would not be affected and that no further action was required on their part.
When asked about the Borrow service closure, a Coinbase spokesperson noted:
We regularly evaluate our products to ensure we're prioritizing the offerings that our customers care about most.
Coinbase Borrow allowed users to borrow up to 40% of their Bitcoin (BTC) holdings, with a $1 million cap, without undergoing credit checks. However, it is worth noting that borrowers paid a nearly 9% annual percentage rate for the service.
This announcement came amidst an ongoing tussle between Coinbase and the Securities and Exchange Commission (SEC), which issued a Wells Notice to the crypto exchange in March, citing potential securities law violations.
On top of that, recently, Citi analysts downgraded the company's shares from "buy" to "neutral." However, it didn't stop Cathy Wood's ARK Invest from purchasing Coinbase stocks. On May 1st, the company acquired over $8 million worth of Coinbase stocks.
Earlier this week, Coinbase took a long-anticipated step and launched the derivatives trading platform Coinbase International Exchange (CIE).
It is worth noting that on May 4th, Coinbase is set to publish its Q1 results.
