Coinbase ends loan option for Bitcoin traders amid FTX failure

Coinbase, a U.S.-based cryptocurrency exchange, has informed crypto traders that they would be unable to obtain loans from the exchange starting from May 10, 2023.

The cryptocurrency exchange offers a service known as “Coinbase Borrow”, that allows customers to use 30 per cent of their Bitcoin holdings to borrow about $1 million, which comes with interest.

Bitcoin traders got the update on Coinbase’s loan option via email on Wednesday. It was disclosed that the decision was driven by regulators’ scrutiny.

Since the collapse of FTX, another cryptocurrency exchange, regulators have been tightening their grip over exchange platforms to protect investments in the crypto industry.

Ripples Nigeria previously reported that the founder of FTX, Sam Bankman-Fried, had used his exchange platform as a credit source to fund his lifestyle and political donations.

READ ALSO:Coinbase CEO conducts IPO to prove Godwin Emefiele, CBN, others wrong

The credit obtained was investments from customers trading on FTX. This allegedly led to the collapse of the trading platform. He was arrested and has been hit with charges, such as misuse of customers’ funds and fraud, amongst others.

With the failure of FTX hanging over the head of cryptocurrency exchange platforms, Coinbase updated its loan option, stating traders on the platform will no longer have access to their credit from May 10.

“Beginning May 10, 2023, customers will no longer be able to take out new loans with Coinbase Borrow,” the email reads.

Coinbase said the decision to end the credit option will not affect previous loans extended already, “There is no impact on your outstanding loans and there is no action required at this time.

“You will continue to have access to your loan history and the full Borrow dashboard,” Coinbase stated.

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