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 select US states will soon be able to borrow 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 waitlist and is expected to go live in the fall, a Coinbase spokesperson told The Block. Starting with bitcoin, Coinbase plans to explore more crypto assets in the future, as well as support more states. “We are actively seeking licenses in many other US states”
Coinbase would offer cash loans of up to 30% of customers’ bitcoin holdings or a maximum of $20,000. Regarding interest rates, the exchange would charge a fixed annual rate of 8%, for the maximum repayment period of one year.
“All customers will maintain 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
By comparison, BlockFi’s interest rates vary based on customer risk profiles and other factors. They start at as low as 4.5% per year A quick check from BlockFi website shows that the company charges an interest rate of 9.70% to borrow $20,000 cash against bitcoin as collateral, at a loan-to-value (LTV) ratio 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 such as home renovations or car repairs, without having to sell their crypto prematurely or take out high-interest personal loans. Coinbase said its customers won’t need to fill out a lengthy application or go through a credit check and can get the 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 lending product, as recently reported by The Block. Other players in the lending space include Celsius, Nexo, and SALT Lending, among others.
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