- Coinbase exchange has rolled out a new service, lending crypto to institutional players in the US.
- With up to $57 million raised for the program, the exchange has presented the securities offering to the US SEC.
- BlockFi and Genesis offered similar services before their financial crises in 2022, following exposure to FTX and Alameda Research.
- Coinbase Layer-2 Base chain has suffered a glitch, with the network citing a "stall in block production."
Coinbase exchange has stepped in to fill the gap BlockFi and Genesis Global left after the two lending firms faced sudden financial crises reported in 2022 as part of the bleed from exposure to crypto exchange FTX and its sister firm, Alameda Research.
Also Read: BlackRock deliberately driving down Bitcoin price in anticipation for Spot BTC ETF approval, analyst says
Coinbase offers securities to institutional players
Coinbase, the largest cryptocurrency exchange in the US by trading volume, has set up a crypto lending unit to serve institutional players, raising up to $57 million for the program thus far. It comes after crypto lenders BlockFi and Genesis Global filed for bankruptcy, leaving a void on which the exchange now capitalizes.
While there has not been any formal announcement from the exchange, this revelation came to light in a recent submission to the US Securities and Exchange Commission (SEC). An excerpt from the filing reads:
Notifying the SEC and/or each State in which this notice is filed of the offering of securities described and undertaking to furnish them, upon written request, in accordance with applicable law, the information furnished to offerees.
The product allows clients to lend to the exchange and provide more collateral than the loan's value. This over-collateralization is a strategy intended to prevent challenges in case the worst happens. An individual close to the matter to CoinDesk that, in turn, the exchange (lender) offers the capital inflow for institutional trading clients like the tier-one brokerage service banks do in the traditional finance (TradeFi) sector.
This platform will allow users to lend their capital to Coinbase, which the exchange will subsequently loan to institutional customers.
Although different, this is not the first time Coinbase is presenting itself as a lender. In 2021, the exchange advertised a "controversial Lend program" that was later canceled following a rejection by the SEC, with the regulator threatening to sue the exchange if it launched the Lend initiative. Citing Coinbase Chief Legal Officer Paul Grewal at the time:
The SEC said Lend would violate long-standing securities regulations, pointing to US Supreme Court cases including Howey and Reves.
This time around, the US-based exchange focuses its lending services specifically on institutional players, based on the assumption that large investors have the financial capacity to manage. It also puts the product up for less burdensome regulation, particularly in the US market.
Coinbase Layer-2 Base suffers temporary glitch
Meanwhile, a status update indicates that the exchanges Layer-2 Base program has experienced a stall in block production. The incident, which is easily the most significant technical challenge experienced by the protocol since its premiere in early August, has sparked ridicule.
Coinbase won’t acknowledge Solana for payments and now Base is down LOL@blknoiz06
— MM (@SoftServedGummy) September 5, 2023
As efforts to resolve the situation continue, “users may have issues submitting transactions. ”
Base chain stall update
The glitch comes a day after the chain's Total Value Locked (TVL) surged by over $200 million in light of the Aerodrom decentralized exchange deployment as developers pushed for enhanced liquidity on the Base chain. Despite the temporary stall, its TVL continues to increase, recording up to $410.3 million at the time of writing.
DeFiLlama: Base TVL
This points to increasing user deposits, a sign of continued interest in the decentralized exchange. FXStreet will bring you updates concerning the block production stall as they unfold.
Open Interest, funding rate FAQs
How does Open Interest affect cryptocurrency prices?
Higher Open Interest is associated with higher liquidity and new capital inflow to the market. This is considered the equivalent of increase in efficiency and the ongoing trend continues. When Open Interest decreases, it is considered a sign of liquidation in the market, investors are leaving and the overall demand for an asset is on a decline, fueling a bearish sentiment among investors.
How does Funding rate affect cryptocurrency prices?
Funding fees bridge the difference between spot prices and prices of futures contracts of an asset by increasing liquidation risks faced by traders. A consistently high and positive funding rate implies there is a bullish sentiment among market participants and there is an expectation of a price hike. A consistently negative funding rate for an asset implies a bearish sentiment, indicating that traders expect the cryptocurrency’s price to fall and a bearish trend reversal is likely to occur.
Information on these pages contains forward-looking statements that involve risks and uncertainties. Markets and instruments profiled on this page are for informational purposes only and should not in any way come across as a recommendation to buy or sell in these assets. You should do your own thorough research before making any investment decisions. FXStreet does not in any way guarantee that this information is free from mistakes, errors, or material misstatements. It also does not guarantee that this information is of a timely nature. Investing in Open Markets involves a great deal of risk, including the loss of all or a portion of your investment, as well as emotional distress. All risks, losses and costs associated with investing, including total loss of principal, are your responsibility. The views and opinions expressed in this article are those of the authors and do not necessarily reflect the official policy or position of FXStreet nor its advertisers. The author will not be held responsible for information that is found at the end of links posted on this page.
If not otherwise explicitly mentioned in the body of the article, at the time of writing, the author has no position in any stock mentioned in this article and no business relationship with any company mentioned. The author has not received compensation for writing this article, other than from FXStreet.
FXStreet and the author do not provide personalized recommendations. The author makes no representations as to the accuracy, completeness, or suitability of this information. FXStreet and the author will not be liable for any errors, omissions or any losses, injuries or damages arising from this information and its display or use. Errors and omissions excepted.
The author and FXStreet are not registered investment advisors and nothing in this article is intended to be investment advice.
Recommended Content
Editors’ Picks
Turn off Solana and win $400,000 - Solana Foundation executive announces offer
Solana has been touted as an Ethereum killer, but as with every blockchain in the crypto market, the network does not come without its fair share of issues. While many who get hacked or exploited deal with the issues after the fact, Solana intends to get a step ahead by making a very lucrative offer to white hat hackers.
Grayscale vs. SEC deadline: Commission faces a midnight Friday deadline to challenge August 29 loss
Grayscale Investments secured a resounding victory in its longstanding case against the US Securities and Exchange Commission in late August. The lawsuit started in October after the firm approached the D.C. Circuit Court pushing to have its Bitcoin Trust converted to an Exchange-traded fund.
Loom Network price hits strong weekly resistance after 32% surge as LOOM ranks high on Korea’s Upbit
Loom Network token is highly bullish, passing as a rather lucrative investment for scalping traders, buying and selling the asset within a short period to make small profits.
Voyager founder charged by CFTC for fraud and by FTC for misleading investors that lost $1 billion
Voyager was among the first crypto companies to collapse and file for bankruptcy in 2022. While the platform has been making efforts to return its customers' assets since then, it looks like the regulatory bodies are not willing to be patient.
Bitcoin: Can BTC bears challenge crypto’s 2023 bull rally?
Bitcoin (BTC) price is at a critical juncture in the weekly time frame, where bulls and bears are battling for control. However, a multi-time-frame analysis shows that BTC is bullish daily and is likely to rally higher.