Coinbase Ceases Borrowing Program as Regulatory Scrutiny Mounts

Users of the American trading platform recently received notifications stating that the issuance of new loans through the borrowing program will cease on May 10. This program allowed users to obtain fiat loans of up to $1 million by utilizing 30 percent of their Bitcoin assets as collateral, with accompanying interest rates.

In the wake of the downfall of FTX cryptocurrency exchange, Coinbase has found itself under increased regulatory scrutiny. As a result, the company anticipates enforcement actions from the U.S. Securities and Exchange Commission (SEC) due to purported violations of securities regulations.

Nevertheless, it appears that the discontinuation of the Coinbase Borrow service is unrelated to any impending or previous legal issues with the SEC. An anonymous source with knowledge of the situation informed CoinDesk that the decision to shut down the borrowing program was not influenced by any past or ongoing SEC issues.

A representative of the exchange, when approached by CoinDesk, cited diminished demand as the reason for the decision to halt the borrowing program.

The spokesperson stated that the closure on May 10 will not affect customers with pending loans and will not require further actions. However, all incoming customers looking to make a loan will not be able to after that day.

Initially introduced in November 2021, Coinbase Borrow was promoted as a convenient method for users to secure fiat loans without having to sell their Bitcoin holdings, which could potentially result in taxable gains or losses. The crypto exchange still ranks as one of the most used platforms globally with millions of dollars in active trades.

Crypto lending has stirred controversy due to its potential risks and regulatory concerns, leading some companies like Gemini and BlockFi to face scrutiny. The industry's rapid growth has prompted regulators to question the sustainability and legality of such practices, sparking debates on the need for enhanced oversight and consumer protection.

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