Shoring up the Crypto Lending Market
The crypto lending sector witnessed the bankruptcy of several major companies such as BlockFi, Celsius, and Genesis Global in 2022 due to a liquidity crisis caused by the bear market. This significant market turmoil prompted industry insiders to call for solutions to issues connected with short-term assets and short-term liabilities. Coinbase’s latest product aims to provide an answer to these calls.
Lending Digital Assets under Standardized Terms
The new crypto lending service allows institutions to lend digital assets to Coinbase under standardized terms. It is designed to qualify for a Regulation D exemption, which exempts it from full Securities and Exchange Commission (SEC) registration and allows for capital raising. Within a few days after the first sale on Aug. 28, five investors had already invested $57 million in the new lending program according to a filing with the SEC.
Previous Legal Challenges
The launch follows months after the SEC charged the cryptocurrency exchange with alleged sale and offering of unregistered securities in connection with its crypto staking services, which allow users to earn yields on giving their crypto to the platform. Coinbase staunchly opposed the allegations and had to pause its staking program in several states while the proceedings continued. However, in the face of ongoing legal challenges, the National Futures Association recently granted the exchange permission to offer eligible US clients with direct access to crypto futures through its platforms.
Key Points
- Coinbase has launched a new crypto lending platform for institutional investors in the US.
- The platform allows institutions to lend digital assets to Coinbase under standardized terms.
- The new service, a part of the existing offering Coinbase Prime, attracted an investment of $57 million just a few days after its launch.
- Coinbase faced charges from SEC for alleged sale and offering of unregistered securities.
- The new lending service aims to offer more economic freedom and opportunity, marking a step towards modernizing the century-old financial system.
