Coinbase announced yesterday that retail customers in the US will start to have access to fiat loans backed by at least 30% of their bitcoin assets. This will be done via their platform. The San Francisco-based trade platform happens to be one of the largest Fintech Exchange and is introducung the lending business to its very well regulated crypto platform. For its lending service, it has similar reckless risk averse requirements in place as the traditional banking system. Coinbase has limited the credit available to each customer to be $20,000 at an interest rate of 8% for bitcoin-backed loans with the term of one year or less. The way this arrangement works is that, within the space of 2 or 3 days, customers will be able to access their loans without even needing to fill out an application form.
Max Brazburg, the Head of product at Coinbase explained via an email statement that:
“Customers may use bitcoin-backed loans in different ways depending on their financial needs, including for large expenditures like home or car repairs, financing major occasions like a wedding, or helping to manage higher-interest personal loans or credit card debt,”
Brazburg explained that while Coinbase is working hard to gain permits in other states in the US, the product is already accessible in about 17 states. Even now, a waitlist has opened since yesterday including the tagline:
“Have you ever needed cash for something urgent, like a car or home repair? In the past, you might have sold Bitcoin to cover it and incurred a taxable gain or loss. Now you don’t have to.”
Coinbase highlighted that instead of reinvesting the securities given for loans like other crypto lenders, it will rather keep the bitcoin on the exchange. It appears that other Crypto products are looking into the lending space as Square announced this week that a plausible lending product may storm from their current testings. They iterated that they will be dealing in short term loans from $2-$20.
Joseph Kelly, the Founder and CEO of Crypto lender, Unchained Capital, explained that “It’s a good bull-market product when customers have excess capital they’d like to do something with,” Kelly said. “We’ve almost never seen a monopoly lending market … I’d expect other exchanges to follow suit.”
The following states already enjoy this lending product in the United States: Arkansas, Connecticut, Alaska, New Jersey, Florida, Georgia, Illinois, Massachusetts, New Hampshire, Oregon, North Carolina, Utah, Texas, Virginia, Nebraska, Wisconsin and Wyoming.
