Coinbase (COIN) has created a new crypto lending service in the U.S. for institutional clients, helping fill the void left by the blowups of firms like Genesis and BlockFi.
The platform was quietly revealed in a U.S. Securities and Exchange Commission filing on Sept. 1, which showed $57 million had already been raised for the program.
According to a person familiar with the matter, clients can lend Coinbase money – predominantly crypto assets – while also providing more collateral than the loan is worth, with the required amount adjusted daily. Such overcollateralization acts as a safeguard from disaster.
Coinbase can then turn around and lend that money to institutional trading clients – akin to the prime brokerage service banks provide in traditional finance, the person familiar said.
Genesis and BlockFi provided similar lending services in the U.S., but suffered massive losses last year that drove them, fully or in part, into bankruptcy court.
The new service differs from the controversial Lend program that Coinbase canceled in 2021. That was pitched at retail customers, and SEC officials objected. This latest lending service is instead geared toward institutions, which means regulation is less onerous – on the presumption large investors have the sophistication to handle it.
"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."