Coinbase (COIN) has launched a crypto lending service in the United States specifically designed for institutional clients. This move aims to address the gap left by the failures of companies like Genesis and BlockFi. The existence of this platform was revealed through a filing with the U.S. Securities and Exchange Commission on September 1, which disclosed that $57 million had already been raised for the program.
According to a reliable source, clients will have the opportunity to lend money to Coinbase, primarily in the form of cryptocurrencies, and receive collateral that exceeds the value of the loan. This overcollateralization serves as a protective measure against potential losses. Subsequently, Coinbase can utilize these funds to provide secured loans to institutional trading clients, similar to the prime brokerage services offered by traditional banks.
Genesis and BlockFi previously offered similar lending services in the U.S., but experienced significant losses last year, leading them to file for bankruptcy, either partially or entirely. It is important to note that this new service differs from Coinbase’s controversial Lend program, which was canceled in 2021 due to objections from the U.S. Securities and Exchange Commission. The previous program targeted retail customers, whereas the current lending service is specifically tailored for institutional investors, resulting in less burdensome regulation under the assumption that larger investors possess the necessary expertise to handle it.