Coinbase has notified prioritized loan holders and is implementing measures for a smooth transition, offering a four-month loan repayment period and customer support through Coinbase One, a subscription product with multiple benefits for traders.
Customers with outstanding balances in Coinbase Borrow must repay their loans by November 20, 2023. The lending product allows customers to borrow loans up to 30% of their Bitcoin holdings, with a maximum limit of $1 million.
Introduced in August 2020 and widely launched in November 2021, the Borrow program enables users in select US states to borrow up to $1 million using their Bitcoin as collateral, with an 8.7% APR. This product helps customers avoid selling Bitcoin in emergencies when they need cash.
In May, Coinbase announced the discontinuation of new loan applications through Coinbase Borrow as part of their routine product evaluation process.
According to a Coinbase spokesperson, the decision to close Coinbase Borrow was attributed to a decrease in demand.
The closure of the Borrow program coincides with an ongoing legal dispute between Coinbase and the Securities and Exchange Commission (SEC). The dispute emerged in early June when the SEC filed a lawsuit alleging that Coinbase violated US securities regulations pertaining to the trading and staking of several cryptocurrencies, which were classified as securities by the SEC. The affected cryptocurrencies include SOL, ADA, MATIC, FIL, SAND, AXS, CHZ, FLOW, ICP, NEAR, VGEXODASH, and NEAR.
In a similar vein, Coinbase previously suspended the lending product named Lend in November 2021 after receiving a warning from the SEC. Lend offered a crypto savings account with a 4% annual percentage yield (APY), surpassing the returns of most traditional banks.