Coinbase, announced the gradual wind-down of its lending service, Coinbase Borrow. On Thursday, the platform’s users were notified that they must settle any outstanding loan balances by November 20, 2023, or risk default and have their Bitcoin collateral sold by Coinbase.
Coinbase Borrow was a program that allowed customers to secure fiat loans up to $1 million, leveraging up to 40% of their Bitcoin holdings, with an annual interest rate of 8.7%. In May, users were informed about the discontinuation of new loan applications under the program. The recent announcement provides further details on the closure and the implications for existing loan holders.
A Coinbase spokesperson stated that the decision to end the program officially was made “to focus our resources on the products and services that our customers care about most.” The exchange also cited “low adoption” as the reason for the move, but the precise number of users who utilized the program is unclear.
Coinbase is taking extra measures to ensure a smooth transition for its customers. They have provided customers with a four-month repayment period and access to prioritized customer service through Coinbase One. They are also waiving the typical 2% liquidation fee if customers choose to use their BTC collateral to pay back the loan or take no action, and Coinbase sells the BTC for them.
If customers do not repay their loan by the due date, Coinbase will sell their BTC collateral to repay the outstanding loan. The liquidations will take place over five days to minimize slippage of any BTC sell orders by spreading them out over time. Customers will receive an email notifying them of all liquidations.
Coinbase is offering all impacted customers four months of free membership to Coinbase One, which includes prioritized customer support. Coinbase One membership also includes perks such as zero trading fees, boosted staking rewards, and more. After the free months expire, the membership will renew at $29.99 per month. Customers can cancel the membership before the four free months ending to avoid being charged.
Customers will be able to access their loan history and the Borrow dashboard until May 1, 2024, as per an email sent to users. The closure of Coinbase Borrow does not appear to be directly related to the SEC’s actions, despite the recent scrutiny of other aspects of Coinbase’s services.