xThe cryptocurrency exchange Coinbase has decided to suspend issuing new loans via its Borrow service, a tool that enables select US clients to pledge cryptocurrency as security in return for a cash loan.
Customers of Coinbase Borrow were informed in an email sent on May 3 that they would no longer be able to apply for new loans starting on May 10. The email was posted on Twitter by those who received it.
Customers did not need to take any more action, it was stated, and there would be no effect on existing debts. Why Coinbase shut off Borrow has not been made publicly known. The representative for Coinbase said: “We regularly evaluate our products to ensure we’re prioritizing the offerings that our customers care about most.”
With a $1 million cap, the program enables customers to borrow money from the exchange against up to 40% of their Bitcoin $29,089 holdings. Users pay a little under 9% annual percentage rate for the service, and there is no credit check required.
The revelation comes amid a legal dispute between Coinbase and the Securities and Exchange Commission (SEC), which issued the exchange a Wells notice in March over “possible violations of securities laws.”
The notice to consumers comes before the release of its first-quarter earnings, which is anticipated on May 4. Ahead of the exchange’s Q1 results, Citi investment analysts downgraded Coinbase shares from “buy” to “neutral.” According to analysts from Mizuho, Coinbase’s “fundamentals remain weak” due to reduced average daily trading volumes, and the company has maintained its “underperform” rating on the platform.
Coinbase made the decision to expand its exchange earlier this week, introducing the Coinbase International Exchange (CIE) derivatives trading platform on May 2 despite what seemed to be a crackdown on crypto companies in the U.S.
