Coinbase to stop issuing Bitcoin-backed loans from next week

Crypto exchange Coinbase will no longer offer its Borrow program from next week. The program allowed users to borrow cash against bitcoin as collateral.

"Beginning May 10, 2023, customers will no longer be able to take out new loans with Coinbase Borrow," the company said in an email to customers on Wednesday that was shared by users on Twitter. "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."

The decision to sunset Borrow appears to have come from a lack of demand for the product. “We regularly evaluate our products to ensure we’re prioritizing the offerings that our customers care about most,” a Coinbase spokesperson told The Block.

Coinbase first unveiled the Borrow program in August 2020 and then publicly launched it in November 2021. The program allowed users in select U.S. states to borrow up to $1 million from Coinbase using their bitcoin as collateral at a variable annual percentage rate (APR) of 8.7%. It allowed users to avoid selling their bitcoin when they needed cash for something urgent, which could incur a taxable gain or loss.

Coinbase Borrow also offered a fixed-term loan only for Connecticut residents, allowing eligible customers to borrow up to $100,000 at 8% APR using bitcoin as collateral.

Coinbase Borrow termination comes amid U.S. regulatory battle

The termination of the Borrow program comes amid a regulatory dispute between Coinbase and the Securities and Exchange Commission. The SEC sent Coinbase a Wells notice in March that the company said was in relation to "possible violations of securities laws." Last month, Coinbase sued the SEC in order to force the agency to respond to a petition that the company filed demanding the SEC publish specific rules for digital assets.

In September 2021, Coinbase had to shelve its Lend program after an SEC warning. The product was supposed to offer a crypto savings account that would earn customers a 4% APY, a return higher than most savings accounts at traditional banks.

Amid ongoing U.S. regulatory tensions, Coinbase expanded outside the U.S. earlier this week by launching an international derivatives exchange from Bermuda, allowing users to trade perpetual futures with currently 5x leverage. Later today, the company is set to announce its first-quarter financial results.

Updates with comments from Coinbase spokesperson