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(Kitco News) - In the wake of a crypto winter that was exacerbated by the failure of multiple crypto lending platforms – including Genesis, Celsius, and Voyager Digital – Coinbase, the top U.S.-based cryptocurrency exchange, has announced that it will be shutting down its lending wing, Coinbase Borrow.
Coinbase Borrow allowed users in certain U.S. states to borrow fiat loans of up to $1 million against their Bitcoin holdings at an annual interest rate of 8.7%.
According to a May 3 screenshot posted by a Coinbase user on Twitter, the exchange has begun sending notices to Borrow users informing them that they will no longer be able to take out loans beginning May 10.
“Hi Coinbase Customer, Beginning May 10, 2023, customers will no longer be able to take out new loans with Coinbase Borrow,” the message said. “There is no impact on your outstanding loans and there is no action required at this time. You will continue to have access to your loan history and the full Borrow dashboard.”
Usage statistics for Coinbase Borrow are not clear, so it’s unknown how many customers will be affected by this decision.
Kitco Crypto reached out to Coinbase for a comment and received the following response from a spokesperson for the exchange:
“We regularly evaluate our products to ensure we’re prioritizing the offerings that our customers care about most. 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.”
This latest move from Coinbase follows the issuance of a Wells notice by the SEC, a development that typically precedes the announcement of an official enforcement action for the unlicensed issuance or sale of securities.
The exchange has pushed back against these accusations from the SEC, saying that despite their best efforts to work with the regulator, they have yet to receive clear guidance on several areas related to the regulation of cryptocurrencies. These include a basic definition of what constitutes a “digital asset” and clear guidance on whether certain tokens are considered commodities or securities.
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On Thursday, the SEC was ordered by the Third Circuit Court of Appeals to file its response to a petition submitted by Coinbase seeking regulatory clarity on cryptocurrencies within ten days.
The original petition, which was filed by the exchange in July 2022, asked the SEC to propose and adopt a clear regulatory framework for the cryptocurrency industry in the U.S. and establish guidelines for companies like Coinbase to work from as they build out their businesses.
The 50-question petition includes a specific inquiry into clarification about the agency’s process of determining the classification of a token as a security or a commodity. The 10-day deadline ordered this week refers to the SEC's requirement to provide a legal basis for why it has not responded to the petition.
