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Coinbase Unveils Specialized Crypto Lending Solution for Institutional Investors

Sep 6, 2023 at 02:12 pm

Coinbase (COIN) has successfully raised $57 million for its latest venture, as confirmed by an official filing with the U.S. Securities and Exchange Commission (SEC) as of September 1st. This substantial investment has been channeled into Coinbase's innovative crypto lending service, specifically tailored to cater to the needs of institutional clients. This strategic move by Coinbase seeks to address the void created by the struggles and setbacks faced by companies like Genesis and BlockFi.

While Coinbase has been relatively discreet about this development, the SEC filing provided crucial insights into the financial backing of the project. Notably, the $57 million in funding has already been secured for the program, indicating strong support and interest from various stakeholders.

The essence of this novel service lies in allowing clients to extend loans to Coinbase, primarily in the form of cryptocurrency assets. In return, these lenders receive collateral that exceeds the value of the loan itself. This overcollateralization approach serves as a protective measure, guarding against potential financial calamities.

Coinbase leverages the capital obtained from these loans to provide secured lending services to institutional trading clients. This offering resembles the traditional prime brokerage services offered by banks in the conventional financial sector, providing institutional clients with access to various financial instruments and services.

It's worth noting that Genesis and BlockFi previously offered similar lending services in the United States. However, both companies incurred significant losses last year, which eventually led them, either entirely or partially, into bankruptcy proceedings.

This new lending service differs markedly from Coinbase's controversial Lend program, which was discontinued in 2021. The previous program was primarily aimed at retail customers and faced objections from SEC officials. In contrast, the latest lending service is explicitly designed for institutional clients, resulting in less cumbersome regulatory requirements. This approach assumes that larger investors possess the necessary sophistication and experience to navigate the intricacies of the crypto lending landscape.

A Coinbase spokesperson emphasized the significance of this initiative, stating, "With this service, institutions can choose to lend digital assets to Coinbase under standardized terms in a product that qualifies for a Regulation D exemption." Coinbase's overarching goal is to modernize and revamp the financial system, which was established over a century ago. They aim to achieve this by harnessing the potential of cryptocurrencies to offer individuals greater economic freedom and opportunities. Coinbase remains dedicated to building trusted crypto products and services and actively supporting others in the crypto ecosystem with the ultimate aim of onboarding one billion people into the world of cryptocurrencies.

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