Coinbase enters lending space allowing cash loans for bitcoin collateral

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Crypto exchange giant Coinbase has ventured into the lending space, a move that would put it in direct competition with industry players like BlockFi.

In a blog post shared with The Block on Wednesday, Coinbase said customers in some U.S. states may soon be borrowing money using bitcoin (BTC) as collateral. At launch, Coinbase plans to support 17 states: Alaska, Arkansas, Connecticut, Florida, Georgia, Illinois, Massachusetts, New Hampshire, New Jersey, North Carolina, Oregon, Texas, Virginia, Nebraska, Utah, Wisconsin and Wyoming.

The new “Borrow” feature is currently on a waiting list and is expected to go live in the fall, a Coinbase spokesperson told The Block. While starting with bitcoin, Coinbase intends to explore more crypto assets in the future, as well as supporting more states. “We are actively seeking licenses in many other states in the United States”

Loan conditions

Coinbase would offer cash loans of up to 30% of customers’ bitcoin holdings or a maximum of $ 20,000. Regarding interest rates, the stock exchange would apply a fixed annual rate of 8%, for the maximum repayment term of one year.

“All customers will keep the 8% rate offered to them when they take out the loan, for the duration of the loan,” the spokesperson told The Block. However, Coinbase may revise the rate over time, depending on factors such as market conditions, the spokesperson added.

Coinbase Borrow – A screenshot shared with The Block by Coinbase

In comparison, BlockFi’s interest rates vary based on clients’ risk profiles and other factors. They start at as low as 4.5% pa. Quick check on BlockFi’s website shows company charges 9.70% interest rate for borrowing $ 20,000 in cash against bitcoin as collateral, at a loan-to-value ratio (LTV) of 35% (BlockFi does not have 30% LTV, but offers up to 50% LTV). BlockFi also supports Ether (ETH) and Litecoin (LTC) as collateral.

Cash-for-crypto loans are typically taken out by customers to meet short-term needs like home renovations or auto repairs, without having to sell their crypto prematurely or take out high-interest personal loans. Coinbase said its customers would not need to complete a long application or go through a credit check and would be able to get money “within 2-3 days.”

BlockFi is a key competitor for Coinbase, as both companies are reportedly looking to go public in the near future. However, Ripple is also working on a loaner product, as The Block recently reported. Some other players in the lending space include Celsius, Nexo, and SALT Lending, among others.

© 2021 The Block Crypto, Inc. All rights reserved. This article is provided for informational purposes only. It is not offered or intended to be used as legal, tax, investment, financial or other advice.


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