Coinbase, America’s largest crypto exchange, is winding down its Borrow program and has given borrowers four months to repay their loans.
Coinbase To Shut Down Borrow Program
The Coinbase Borrow program allowed eligible Coinbase customers in certain US states to borrow up to $1 million worth of US dollars by putting up bitcoin or other cryptocurrencies as collateral.
Many saw Coinbase Borrow as an easy way to access cash without selling their crypto holdings. Unfortunately, the crypto exchange recently announced it is shutting down the program. Current borrowers have four months left to repay any outstanding loan balances before the program closes for good.
According to a company blog post, the update will only affect customers with existing loans with due dates after November 20, 2023. After this date, all accounts that still have outstanding loans will be paid off by selling enough BTC collateral to cover the full amount of any outstanding debt.
The exchange initially charges a 2% liquidation fee for borrowers who are unable to pay up their loans before the due date. However, the exchange said the liquidation fee is going to be waived in this case.
COIN price sitting at $102 | Source: Coinbase Global, Inc. on Tradingview.com
Why Is The Exchange Shutting Down The Program?
The closure of Coinbase Borrow was first touted two months ago. In early May, Coinbase announced May 10 as the final day customers can take out new loans through the program.
Launched in November 2021 during the height of the crypto bull run, Coinbase’s borrow program was advertised as a way to get fiat loans quickly without needing to sell bitcoin. With the entire cryptocurrency market now in calmer waters, it seems the borrow program isn’t gaining as much traction as hoped. According to Coinbase, it is making the decision in order to focus on other products. “the offerings that our customers care about most.”
“We regularly evaluate our products to ensure we’re prioritizing the offerings that our customers care about most. After much consideration, we have made the decision to wind down Coinbase Borrow,” the blog post read.
Regulatory issues could also have played a role in the exchange’s decision. The California-based exchange has been under scrutiny from US regulators for years. The Securities and Exchange Commission (SEC) recently sued Coinbase on June 6, for its staking program and for making billions of dollars in its role as a middleman for the alleged trading of unregistered securities.
Cryptocurrency regulations on trading, borrowing, and staking remain unclear. However, Coinbase says the SEC can only pursue its claims if cryptocurrencies and staking services have been established as securities.