Coinbase still under regulatory scaffold. Since the beginning of June, the Binance and Coinbase exchanges have been the subject of legal proceedings by the US regulator. The SEC (Securities Exchange Commission) of Gary Gensler accuses them of violating financial laws. And this battle is having real repercussions on the activities of these two behemoths of the crypto sector. Here’s the lowdown.
Bitcoin-backed loans on Coinbase definitively halted
Binance, the CZ exchange, has gradually become persona non grata in many countries around the world. The company was even forced to lay off its employees en masse.
Coinbase, for its part, is hardly better off. And this, despite its endorsement by the giants of traditional finance, through the multiple requests ofETF Bitcoin. While Brian Armstrong’s company had endeavored to cooperate with regulators throughout its development, this was clearly not enough. A real stab in the back for the company’s CEO, who is constantly trying to improve his company’s image. to establish clear regulations for the crypto sector.
In this case, the exchange is facing requests from several US states to halt its staking activities. Coinbase has been obliged to stop its services in 4 states California, New Jersey, South Carolina and Wisconsin.
But that’s not all: Coinbase is also preparing to stop its « Borrow » service, which offered loans backed by bitcoin. Coinbase users could take advantage of dollar loans by pledging their bitcoins as collateral. Back in May, the exchange announced that it was no longer accepting new loan applications. Today, Coinbase is going one step further. Current users of the service will have to repay their loans by November 20. Otherwise, the exchange will be obliged to sell their bitcoins on the market.
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Regulatory pressure puts an end to innovative exchange services
« We have decided to completely close Coinbase Borrow for retail users from November 20, 2023, in order to focus on the products and services our users use the most. (…) We have informed impacted borrowers and are taking special measures to ensure a smooth transition for them. This includes a repayment period spread over 4 months and priority access to our customer support via Coinbase One. »
This service will therefore soon be terminated for retail customers, but will nevertheless continue to operate for institutional and Prime investors. A consequence of Coinbase’s battle with the regulator, or a genuine strategic choice on their part?
The battle rages on between US exchanges and regulators in this adolescent period of the crypto sector. Adoption will require a framework, and we’re in the middle of it. Leadership in this decisive sector of Tech will be obtained by governments that succeed in finding the best compromise between investor protection and freedom of innovation. Each country or region is gradually defining its own laws for this emerging financial sector, as in Europe with MiCA.
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