The famous US crypto exchange Coinbase has announced the total closure of its Borrow service.
It had already suspended the disbursement of new loans in May, and by 20 November it wants all of them to be extinguished.
Crypto exchange Coinbase shuts down Borrow program
Borrow was Coinbase’s program dedicated to retail customers that allowed them to obtain cash loans by giving Bitcoin as collateral.
These were loans through which fiat currencies could be obtained in exchange for Bitcoin, with the possibility of getting back the BTC put up as collateral at the end of the loan simply by returning the full amount borrowed plus interest.
The service probably had not been very successful, so the exchange decided to discontinue it.
It is worth mentioning that something very similar can be achieved on various DeFi protocols by using stablecoins instead of fiat currency, anonymously, quickly, and without censorship.
Although stablecoins are not exactly the same thing as fiat currencies, they can still be used as an alternative.
Perhaps the success of such decentralized lending protocols is due precisely to the use of stablecoins instead of fiat currencies, because once stablecoin tokens are obtained it is much easier to move them around, and especially because they can also be used virtually anonymously.
The process of closing the service
The process of shutting down Coinbase’s Borrow program actually already began a couple of months ago, when the crypto exchange suspended the provision of new loans.
Yesterday Coinbase kicked off the second and final phase of this process, namely the termination of all loans in place.
The official announcement states that as of 20 July 2023, Coinbase began the gradual process of closing the Borrow program, and that customers with outstanding loans have until 20 November 2023 to repay them.
The problem then arises especially for customers who still have an outstanding loan expiring only after 20 November 2023.
Even in this case, Coinbase says that the full amount of the loan will only have to be repaid until 20 November 2023, otherwise it will be forcibly paid off by the exchange selling enough Bitcoin collateral to settle any unpaid balance, if any.
Coinbase’s other services
The crypto exchange informs that the closure of the Borrow program does not impact other services offered to customers, such as Coinbase Prime Financing.
It also justifies the decision by saying that it regularly evaluates its products to ensure that it prioritizes those that their customers care about the most.
Hence, the official reason for Borrow’s closure is in fact Coinbase customers’ lack of interest in this service.
This reasoning also applies to the countless other services it offers, and that during the current long crypto winter they may lose many users.
As such, it is safe to imagine that before the possible new bullrun, the exchange might decide to suspend or eliminate other services as well, if they are used only by a few customers.
It is worth noting that Coinbase started out purely as an exchange dedicated to small investors and retail savers, but over time has instead become a behemoth that also offers institutional services to large clients.
It is no coincidence that it has been chosen as the custodian for BlackRock’s BTC ETF, should this be approved by the SEC.
This evolution means that there may be several services dedicated to retail in which the exchange has lost interest over time, whereas there may be more and more dedicated to institutional clients instead.
Coinbase is by no means exiting the retail crypto market, but is expanding primarily in the direction of large investors, and this obviously has consequences for the various services it offers.