This new offering from Coinbase, the prominent U.S. cryptocurrency exchange, is aimed squarely at institutional players in the financial markets. first reported on CoinDesk According to insider sources and an SEC filing, this move marks a significant development.
Per documents filed on September 1, Coinbase initially generated $57 million on August 28 to propel this lending service, which was kept under the radar until now.
Through this newly unveiled service, institutions can lend their crypto assets directly to Coinbase. In turn, Coinbase utilizes these assets to extend loans to other large-scale investors, providing them with surplus collateral as a buffer against market volatility.
“Institutions will find an opportunity to lend digital assets to Coinbase under clearly defined terms through this service,” a media outlet mentioned.
Bigger Investors Want Into Crypto
Back in 2021, Coinbase attempted to roll out a lending service, but it was halted by the SEC. That earlier product was more retail-focused, while this current initiative targets bigger investors.
A spokesperson for Coinbase shared the company's vision to modernize the financial landscape by leveraging cryptocurrency's potential. The goal is to forge a financial ecosystem granting users greater economic freedom and diverse opportunities, distinct from traditional banking systems.
This development emerges amidst Coinbase's ongoing legal challenges with the SEC, showcasing the company's resilience in the face of regulation. Recently, they also listed PayPal's stablecoin PYUSD and boosted their investment in USDC.
Looking ahead, Coinbase is exploring new avenues to equip both sizable and modest investors with powerful crypto tools.
Coinbase, a juggernaut in the cryptocurrency exchange space, has also made known its intentions to decentralize Base, its layer-2 scaling solution. The company announced its collaboration with the DAO Optimism Collective and OP Labs to achieve a fully decentralized model.
Base, launched in August 2023, acts as an Ethereum layer-2 solution leveraging optimistic rollups to enhance transaction speed and efficiency. It quickly captured interest, soaring to 100,000 users and securing $100 million in TVL within mere weeks.
Reshaping Crypto Lending
The crypto sector is still recovering from last year's widespread credit crisis that affected several lenders. Inadequate risk management amid market fluctuations led firms like Genesis and BlockFi to declare bankruptcy.
BlockFi, a notable figure in crypto lending, halted withdrawals, swaps, and transfers in mid-2022 due to unpredictable market dynamics. They eventually secured a $250 million revolving credit arrangement with FTX.
Yet, when FTX faced insolvency in November, BlockFi encountered more financial hurdles, resulting in their Chapter 11 Bankruptcy filing after FTX’s downfall.
Genesis, another key player in crypto lending, was unable to withstand the industry setbacks, suspending new loans and redemptions in mid-2022.
After enduring months of difficulties, Genesis sought Chapter 11 Bankruptcy Protection earlier this year, having suffered significantly from its entanglement with the now-bankrupt crypto hedge fund, Three Arrows Capital.
The predicaments facing BlockFi and Genesis underscore the inherent risks of engaging in crypto lending. The marketplace remains wary as confidence in crypto lending hasn't fully recovered.
While Coinbase re-engages with the lending market, there are considerable hurdles due to recent events. However, their refreshed offering has the potential to redefine the landscape, setting a benchmark for others.
