Coinbase
(Nasdaq: COIN) has recently introduced a new crypto lending service in the
United States, primarily targeting institutional clients. This development
comes as a response to the challenges faced by other companies like Genesis and
BlockFi, which experienced significant losses in the past.
The
announcement was made through a U.S. Securities and Exchange Commission (SEC)
filing on September 1st, revealing that Coinbase had already raised $57 million
for this new lending program.
Clients,
who are predominantly institutional investors, can lend money to Coinbase, with
crypto assets being the primary form of collateral. In turn, Coinbase provides
collateral to these clients, typically exceeding the value of the loan. This
overcollateralization serves as a safeguard to protect against potential
losses. Coinbase then uses the funds obtained from clients to offer secured
loans to other institutional trading clients. This service is akin to
traditional prime brokerage services offered by banks in the world of
traditional finance.
Abandoning Controversial
‘Lend’ Program for Retail Customers in 2021
Back
in September 2021, Coinbase’s CEO Brian Armstrong revealed that the SEC had
threatened to sue the exchange if it proceeded with the…
