Coinbase, the renowned US crypto exchange, has recently announced the complete closure of its Borrow service. Initially, the exchange had already suspended new loan disbursements in May, and now it plans to extinguish all existing loans by 20th November.
Borrow was a program designed for retail customers, allowing them to obtain cash loans by using Bitcoin as collateral. Customers could exchange Bitcoin for fiat currencies, with the option to retrieve their collateral BTC at the end of the loan by repaying the borrowed amount plus interest. However, it appears that the service didn’t gain much traction, leading Coinbase to discontinue it.
Notably, decentralized finance (DeFi) protocols offer similar services using stablecoins instead of fiat currency. This alternative allows for quick and anonymous transactions, potentially contributing to the success of such decentralized lending platforms.
The process of shutting down Coinbase’s Borrow program began a couple of months ago with the suspension of new loans. Recently, the exchange entered the second and final phase, terminating all outstanding loans. Customers with existing loans now have until 20th November 2023 to repay them. Those with loans expiring after the deadline must settle the full loan amount by 20th November, or Coinbase will sell enough Bitcoin collateral to cover any outstanding balance.
The exchange clarifies that the closure of the Borrow program will not impact other services offered to customers, such as Coinbase Prime Financing. Coinbase emphasizes its regular evaluation of products to prioritize those that customers value the most. Consequently, the lack of customer interest is the primary reason behind the closure of the Borrow service.
It is plausible to imagine that during this extended crypto winter, Coinbase might consider suspending or eliminating other services that have limited usage by customers. As the exchange continues to evolve, it has shifted from its origins as a platform for small investors and retail savers to a behemoth offering institutional services to large clients. Notably, Coinbase has been selected as the custodian for BlackRock’s potential Bitcoin ETF, subject to approval by the SEC.
While Coinbase remains present in the retail crypto market, its expansion has primarily focused on catering to institutional investors. This strategic shift may lead to discontinuing some retail services in favor of dedicated offerings for institutional clients. As the crypto market evolves, Coinbase’s decisions reflect its commitment to providing services aligned with customer demands and industry trends.