Coinbase, the leading cryptocurrency exchange in the U.S. based by volume, announced that it will be discontinuing its lending product, Coinbase Borrow, from next week.
The company will stop issuing new loans from May 10, although current users of the product will not be impacted as their loans will remain active until their maturity.
"We regularly evaluate our products to ensure we’re prioritizing the offerings that our customers care about most," a Coinbase spokesperson told Decrypt. "Effective May 10, we will stop issuing new loans through Coinbase Borrow. There is no impact on customers’ outstanding loans, and no action is required from them at this time."
Launched in November 2021, Coinbase Borrow allows users from certain U.S. states to borrow up to $1 million using Bitcoin (BTC) as collateral.
Customers can borrow up to 40% of the value of the Bitcoin in their accounts at an annual interest rate of 8.7%, according to the exchange's website.
No relation to regulatory pressure, says Coinbase
The exchange has also indicated that the closure of Coinbase Borrow has nothing to do with the potential enforcement action that may be undertaken following the U.S. Securities and Exchange Commission (SEC) slapping the exchange with a Wells Notice in March.
A Wells Notice is a letter that the SEC sends when it is considering bringing an enforcement action. The notice gives the recipient the opportunity to respond to the allegations made by the agency and explain why they believe enforcement action is not warranted.
In Coinbase’s case, the Wells Notice alleged that the company's staking products constitute unregistered securities, while also mentioning several other aspects of the exchange’s activities, including the Coinbase Wallet.
In response to the SEC’s Wells Notice, Coinbase stated it does not list securities, its Coinbase Wallet product does not constitute a broker, and the exchange’s staking services have nothing to do with a securities offering.
Last week, the San Francisco-based exchange also revealed that it was suing the SEC over its “petition for rulemaking” that was sent to the regulator last July and still remains unanswered. The legal action aims to get the agency to respond to Coinbase’s plea for clearer crypto regulations.
In a separate development earlier this week, Coinbase has launched a new international exchange that will initially offer Bitcoin and Ethereum perpetual futures, with trades settled in USD Coin (USDC).