Coinbase said that it will stop offering the Coinbase Borrow service on May 10. The move comes as governments and financial institutions try to get a handle on the decentralized financial space and put more rules on the crypto business.
Crackdown on crypto by regulators
Authorities all over the world have been cracking down on the cryptocurrency exchange to stop money laundering, fraud, and protect customers. The US Securities and Exchange Commission (SEC) has been very busy looking into and prosecuting fraudulent coin offers and platforms that do not follow US securities laws.
1/ If the SEC follows through on its threat to sue @Coinbase, I believe the SEC will lose.
The SEC's case has a fatal flaw.
And the problem is entirely of @GaryGensler's own making.
Let me explain…
— MetaLawMan (@MetaLawMan) May 3, 2023
Officials have looked into Coinbase’s lending scheme in the past few years. In 2021, the SEC sent the company a Wells warning, which meant that it planned to go to court over Coinbase’s loan product. The US SEC said that Coinbase’s loan scheme was an unregistered security that broke US securities rules.
Because of pressure from regulators, Coinbase has decided to end its Coinbase Borrow service. This service lets customers borrow money against their cryptocurrency assets. The move to end the loan program came after Coinbase said that the number of app downloads and trades had dropped by 33%.
The company said it will keep working with the government to make sure it follows the rules. In a statement,
Coinbase CEO Brian Armstrong said,
“We believe that compliance is essential to the long-term success of our business, and we will continue to work with regulators to shape the future of our industry.”
Wow – well said https://t.co/L2tK0QyOF1
— Brian Armstrong 🛡️ (@brian_armstrong) May 3, 2023
Coinbase’s move to stop lending money could have big effects on the cryptocurrency business as a whole. Lending and borrowing are important parts of decentralized finance. They let users make interest on their assets or borrow money to invest in other cryptocurrencies or traditional financial tools. The end of Coinbase’s lending program could make it harder for users to get loans and reduce the amount of money in the cryptocurrency market.