Coinbase Decides to Halt Fiat Loan Borrowing Service Against Bitcoin Holdings: Details
Coinbase has decided to put a halt on its Coinbase Borrow service. It allowed people to borrow loans up to $1 million (roughly Rs. 8 crore) in fiat currencies against 30 percent of their Bitcoin holdings with interest. The reason why the crypto exchange has decided to take this action, remains largely unknown. It could be because of the ongoing fluctuations in the crypto market in the backdrop of the US continuously increasing the interest rates in order to fight against the current state of inflation.
Starting May 10, Coinbase will not allow its customers to borrow fiat loans.
“We regularly evaluate our products to ensure we’re prioritising the offerings that our customers care about most. Effective May 10, we will stop issuing new loans through Coinbase Borrow,” a Coindesk report quoted a company spokesperson as saying on Thursday, May 4.
Despite May 10 being the last day for people to avail this service from Coinbase, the company has clarified that customers with outstanding loans will not be impacted. They will be able to repay the company in the agreed upon time duration.
Given US’ repeated interest rate hikes and the back-to-back downfalls of banks there, industry insiders have observed a sentiment of ‘de-dollarisation’ taking over the global economic ecosystem. When other countries in the world, begin to reduce their dependency on the US dollar as a reserve currency or a medium of exchange, that process is called ‘de-dollarisation’. Consecutive interest rate hikes in the US have caused many international central banks also to spike their interest rates and save their fiat currency against depreciation.
This could be a reason that could have nudged Coinbase to stop issuing fiat loans for the time being. The company seems to be taking a calculative approach in terms of restructuring its business, especially now that its operations have caught the attention of US’ Securities and Exchange Commission (SEC).
In March this year, the SEC threatened to sue Coinbase Global over some of the crypto exchange’s spot market as well as its Earn, Prime, and Wallet products. Coinbase’s step to get the SEC to make its decision on its petition is being seen as a reaction to the SEC’s threat to probe the crypto firm.
In fact, earlier this week a lawsuit has been filed with a District Court in California by plaintiff Michael Massel against Coinbase. Through this lawsuit, Massel has alleged that the US-based crypto exchange has trespassed Illinois’ Biometric Information Privacy Act (BIPA). This act ensures that no conglomerates can gather and save the biometric details such as thumbprints of their customers.
Counted among the biggest crypto exchanges in the world, Coinbase has recently asked a US court to compel the SEC to provide clarity on crypto rules acceptable in the US after the regulator opened investigations into the business activities of the crypto exchange.