Coinbase has announced that it will discontinue its Borrow program effective from next week. The program allowed users to obtain cash loans by using Bitcoin as collateral.
In a message emailed to users on Wednesday, the firm stated: “As of May 10, 2023, new loans will not be offered on Coinbase Borrow.”
The company added: “This will not have an effect on your current loans, and no action is necessary at this time. You will continue to have access to your loan history and the entire Borrow dashboard.”
Coinbase and the SEC
Coinbase first announced the Borrow program in August of 2020 and publicly launched it in November of 2021. The program allowed users in specific states in the US to borrow up to $1m by using Bitcoin as collateral at a variable annual percentage rate (APR) of 8.7%. This enabled users to avoid having to sell their Bitcoin when in urgent need of cash, as doing so could result in a taxable gain or loss.
Coinbase Borrow also provided a fixed-term loan exclusively for Connecticut residents. Qualified customers could borrow up to $100,000 by using Bitcoin as collateral, with an APR of 8%.
The decision to end the Borrow program coincides with a legal conflict with the Securities and Exchange Commission. In March, the SEC delivered a Wells notice to Coinbase, alleging “potential violations of securities laws”.
Coinbase subsequently filed a lawsuit against the SEC last month in an effort to compel the agency to respond to a petition requesting that the SEC establish clear rules for digital assets.
Coinbase had to discontinue its Lend program in September 2021 after receiving a warning from the SEC. The product was designed to offer customers a crypto savings account with a 4% APY, which is higher than the majority of traditional bank savings accounts.
The company is set to announce its first-quarter financial results today, 4 May.