Coinbase (COIN) has launched a new crypto lending service in the U.S. for institutional clients, aiming to fill the void left by the recent troubles faced by firms such as Genesis and BlockFi. The new service, which was quietly revealed in a U.S. Securities and Exchange Commission (SEC) filing on September 1, will allow clients to lend Coinbase money, predominantly crypto assets, and get collateral exceeding the value of the loan. This over-collateralization acts as a safeguard from disaster.
Coinbase can then turn around and make secured loans to institutional trading clients, similar to the prime brokerage service banks provide in traditional finance. Genesis and BlockFi provided similar lending services in the U.S. but suffered massive losses last year that drove them, fully or in part, into bankruptcy court.
The new service differs from the controversial Lend program that Coinbase canceled in 2021. That program was pitched at retail customers, and SEC officials objected. This latest lending service is instead geared toward institutions, which means regulation is less onerous – on the presumption large investors have the sophistication to handle it.
“With this service, institutions can choose to lend digital assets to Coinbase under standardized terms in a product that qualifies for a Regulation D exemption,” a Coinbase spokesperson said in a statement. “Coinbase is working to update the financial system that was built over 100 years ago, leveraging crypto to provide people with more economic freedom and opportunity. To advance this purpose, Coinbase is building the most trusted crypto products and services, and supporting other builders to bring 1 billion people into crypto.”
The new lending service is still in its early stages, but it has the potential to be a major growth driver for Coinbase. The company has been facing increasing competition from rivals such as Binance and Kraken, and the new service could help it attract more institutional clients.
Coinbase is also facing regulatory scrutiny in the U.S., but the new lending service is seen as a way to comply with regulations and reduce its risk exposure. The company has already raised $57 million for the program, which suggests that there is strong demand from institutional investors.
The launch of the new lending service is a significant development for the crypto industry. It is a sign that the industry is maturing and that institutional investors are becoming more comfortable with crypto. The service could also help to boost the liquidity of the crypto market and make it more attractive to investors.