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Coinbase (COIN) has recently launched an innovative cryptocurrency lending platform in the United States, catering specifically to institutional clients. This initiative aims to address the gap left in the market due to the challenges faced by companies like Genesis and BlockFi.
The platform was discreetly unveiled through a filing with the U.S. Securities and Exchange Commission on September 1, indicating that $57 million had already been secured for the initiative.
As per an individual well-versed in the subject, clients have the option to lend money to Coinbase, primarily in the form of cryptocurrency assets, and receive collateral that exceeds the loan's value. This overcollateralization serves as a protective measure against potential risks.
Coinbase can subsequently offer secured loans to institutional trading clients, a service reminiscent of the prime brokerage services typically offered by traditional banks in the financial industry, as stated by the knowledgeable individual.
Genesis and BlockFi both offered lending services in the U.S., but they faced substantial losses last year, leading them to file for bankruptcy either in full or in part.
The latest lending service distinguishes itself from Coinbase's contentious Lend program, which was terminated in 2021 due to objections from SEC officials. While the Lend program was primarily targeted at retail customers, the current lending service is specifically designed for institutional clients. Consequently, regulatory requirements are less burdensome, assuming that large investors possess the requisite expertise to manage them.
"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," a Coinbase spokesperson said in a statement. "Coinbase is working to update the financial system that was built over 100 years ago, leveraging crypto to provide people with more economic freedom and opportunity. To advance this purpose, Coinbase is building the most trusted crypto products and services, and supporting other builders to bring 1 billion people into crypto."
