Crypto exchange Coinbase has abruptly terminated its service that allowed users to take out fiat loans using crypto as collateral.
In a notice to users on Wednesday, Coinbase said that customers would no longer be able to take out new loans on Coinbase Borrow after May 10.
Hey @coinbase @brian_armstrong @iampaulgrewal you guys tweet/blog/interview about anything you can to put you in a different light than the truth, why no blog or tweet about this with an explanation? @ParrotCapital @Bitfinexed @Cryptadamist pic.twitter.com/2KoWPF0QHZ
— Michael Lossia (@LossiaMichael) May 3, 2023
Coinbase Borrow allowed users to borrow as much as $1 million using their Bitcoin holdings as collateral. The service was offered with 8.7% APR and did not require a credit check.
The surprise notice comes amid a series of regulatory hurdles that challenge Coinbase and other U.S.-based firms in the digital asset industry. In March, Coinbase received a Wells Notice from the U.S. Securities and Exchange Commission (SEC), suggesting an impending lawsuit for the crypto exchange.
Speaking to Laura Shin in an episode of Unchained, Coinbase’s chief legal officer Paul Grewal described the Wells Notice as “a boilerplate recitation of a variety of statutes,” suggesting that the SEC was being deliberately vague as to which Coinbase products it believes are in violation of U.S. laws.
Coinbase issued an official response to the Wells Notice last week, arguing that an enforcement action would present major programmatic risks to the SEC, and that the action itself would fail because the exchange does not list, trade or broker securities.
However, for now, it appears that a potential enforcement action is not the driving force behind the decision to shut down Coinbase Borrow. According to statements made by a Coinbase spokesperson to CoinDesk on Wednesday, the closure had nothing to do with pending or past troubles with the SEC.