Coinbase (COIN) has disclosed in a recent U.S. Securities and Exchange Commission (SEC) filing that it garnered $57 million in funding as of September 1, aimed at a newly designed crypto lending service for institutional clients.
The offering aims to fill the vacuum left by firms like Genesis and BlockFi, which faced significant setbacks last year, pushing them either partially or entirely into bankruptcy. The details of the new platform were discreetly unveiled in the SEC filing, revealing that $57 million had already been mobilized for the venture.
An insider who wishes to remain anonymous stated that institutional clients can lend various crypto assets to Coinbase. In return, they will receive collateral that surpasses the loan value. This mechanism of over-collateralization acts as a safety net against catastrophic events.
The lending assets will subsequently be used by Coinbase to offer secured loans to its institutional trading customers. This arrangement closely mirrors the prime brokerage services provided by traditional financial institutions, the insider noted.
This new lending service is distinctly different from the contentious ‘Lend’ program that Coinbase had previously attempted to roll out in 2021. That program was aimed at the general public and faced opposition from the SEC. Conversely, the new program targets institutional clients, thereby encountering fewer regulatory challenges, given the presumption that large investors possess the expertise to navigate it.
A spokesperson for Coinbase commented, “Institutions can now opt to lend their digital assets to Coinbase under uniform terms, facilitated by a product that complies with Regulation D exemptions.” The spokesperson further added, “Coinbase aspires to revolutionize the century-old financial system by harnessing the potential of cryptocurrency to offer greater economic freedom and opportunity. To that end, we’re committed to developing the most trustworthy crypto products and services while also empowering other innovators to bring 1 billion people into the crypto ecosystem.”