Coinbase users will no longer be able to borrow up to $1 million using Bitcoin as collateral.
The crypto exchange plans to shut down its Borrow program starting May 10, 2023, due to insufficient demand for the product.
Wednesday’s decision also comes amid a tussle between U.S. regulators and crypto businesses like Coinbase, Kraken, and Binance.
Coinbase users will no longer be able to access cash loans using Bitcoin as collateral as the company moves to unwind its Borrow product.
According to an email sent to users on Wednesday, the crypto exchange plans to shut down its Borrow program starting May 10 this year. The move will not affect outstanding loans but users will not have the option to take new loans.
Beginning May 10, 2023, customers will no longer be able to take out new loans with Coinbase Borrow. There is no impact on your outstanding loans and there is no action required at this time. You will continue to have access to your loan history and the full Borrow dashboard.
Coinbase U.S. users were introduced to the Borrow product back in August 2020. The program did not launch till over a year later in November 2021, giving users an option to access cash without liquidating their BTC holdings.
Users in some U.S. states were allowed to borrow as much as $1 million against their Bitcoin balances at an 8.7% annual percentage rate (APR).
Interest in the product has seemingly declined in the two years since its launch. A Coinbase spokesperson noted that the reduced interest was the main reason behind closing the borrow program.
“We regularly evaluate our products to ensure we’re prioritizing the offerings that our customers care about most,” said the spokesperson.
Coinbase Embroiled In Battle With U.S. Regulators
Although regulatory concerns were not the main reason for Wednesday’s decision, the move comes amid tension between U.S. regulators like the SEC and crypto businesses.
The U.S. Securities and Exchange Commission issued a Well notice to Coinbase in March over alleged securities law violations. In response, the crypto exchange sued the SEC to strong Gary Gensler’s commission into clarifying regulations for the crypto industry.
Coinbase is also looking toward offshore options, The company recently launched a derivatives exchange domiciled in Bermuda.