Coinbase, one of the leading cryptocurrency exchanges, has introduced a crypto lending service tailored for institutional investors in the United States. This move comes as Coinbase aims to capitalize on opportunities in the crypto lending market following significant challenges faced by the sector.
The newly launched platform, known as Coinbase Prime, is designed to cater to institutional investors in the U.S., offering a full-service prime brokerage platform that facilitates trade execution and asset custody. Coinbase Prime enables institutions to lend digital assets to Coinbase under standardized terms, with the product qualifying for a Regulation D exemption.
According to reports, Coinbase has already attracted $57 million in investments from its customers for the lending program since its initial offering on August 28. As of September 1, five investors had participated in the program.
The introduction of this crypto lending product comes after Coinbase temporarily halted new loan issuance on Coinbase Borrow in May 2023. This program allowed users to borrow up to $1 million against Bitcoin collateral and was operated by Coinbase Credit, the same entity now managing Coinbase Prime.
It’s worth noting that Coinbase has faced regulatory challenges recently, with the U.S. Securities and Exchange Commission (SEC) charging the exchange with offering and selling unregistered securities related to its crypto staking services. These services allowed users to earn yields by staking their crypto assets on the platform. While Coinbase disputed the SEC’s allegations, it temporarily paused its staking program in certain states during the legal proceedings.
The crypto lending industry as a whole encountered significant difficulties in the past year, with prominent companies like BlockFi, Celsius, and Genesis Global experiencing financial troubles due to a lack of liquidity exacerbated by the 2022 bear market. Experts have emphasized the need for the sector to address issues related to short-term assets and liabilities to prevent such crises from recurring.