The feature that allowed users to take out loans of up to $1 million against 40% of their Bitcoin holdings will be scrapped from May 10.
Coinbase Borrow — which allows users to borrow fiat against their Bitcoin (BTC) holdings — will be scrapped from May 10, the company said in a notice sent to users and shared on Twitter.
The emailed notice did not provide any reason for the shutdown of the feature.
The notice added that the current loans of users will not be impacted. The notice said users would continue to have access to their loan history and the Borrow dashboard.
Coinbase Borrow enabled users to borrow up to $1 million using their Bitcoin holdings as collateral. Users could post up to 40% of their assets as collateral, and no credit checks were involved. The interest on the loans was around 9% annually.
The announcement comes when Coinbase is engaged in a regulatory scuffle with the Securities and Exchange Commission (SEC). In March, the SEC sent a Wells notice to Coinbase Wells notice to Coinbase for potential securities law violations. Last week, Coinbase filed a legal action in federal court to compel the SEC to respond to its 2022 petition that asked for guidance for the crypto industry.
Moreover, Coinbase has been facing multiple lawsuits. Earlier this week, a Coinbase shareholder filed a lawsuit alleging that Coinbase’s top executives and board members saved $1 billion by selling their stocks using inside information of impending bad news.
Coinbase is also being sued for allegedly violating Illinois’ biometric privacy law. The lawsuit alleges that Coinbase collected biometric scans of users without their express consent and without sharing how the data is managed.
Interestingly, Coinbase and other U.S.-based crypto exchanges are expanding outside the U.S. amid regulatory uncertainty. This week Coinbase announced the launch of its international exchange for institutional investors.
Meanwhile, Gemini also launched an offshore derivatives trading platform. More and more crypto businesses are expected to look for friendlier jurisdictions to expand to.