In addition to the failed Lend program, Coinbase has attempted other lending services in the past.
Coinbase has announced that it is working on a crypto lending service for institutional clients in the United States. A September 1 filing with the US Securities and Exchange Commission (SEC) shows that the company has already raised $57 million to go towards the project.
The service would help fill the hole left in the market after the implosion of major crypto lenders like Genesis and BlockFi last year. The exchange reportedly plans to enable clients to lend it money – mainly crypto assets – and hold on to collateral exceeding the value of the loan. In similar fashion to the prime brokerage service offered by banks, Coinbase will then be able to make secured loans to its institutional trading clients.
This new service is not to be confused with the Lend program that was scraped in September 2021 before its launch after the SEC said the product was a security. The regulator was not satisfied with the idea of clients forfeiting the custody of their assets to the exchange. The particular service was geared towards retail clients while the new lending service is aimed at institutional clients, which makes it easier to regulate.
“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,” a Coinbase spokesperson said in a statement. “Coinbase is working to update the financial system that was built over 100 years ago, leveraging crypto to provide people with more economic freedom and opportunity. To advance this purpose, Coinbase is building the most trusted crypto products and services, and supporting other builders to bring 1 billion people into crypto.”
The exemption Coinbase has applied for permits companies to sell securities within certain limits without registering with the SEC. According to the filing, the company applied for exemption through its subsidiary Coinbase Credit, Inc. Coinbase CFO Alesia Haas is named in the filing as a related individual.
In addition to the failed Lend program, Coinbase has attempted other lending services in the past. Through Coinbase Credit Inc., the company launched the Coinbase Borrow service that serviced retail clients with fiat loans of up to $1 million after they deposited Bitcoin as collateral. Users could borrow up to 40% of their Bitcoin holdings at an annual interest rate of 8.7%. The service is currently in wind down and no longer offering loans. Loan holders under the Borrow service have until November 20, 2023 to clear their balances.