- Coinbase users in selected US states can now use their Bitcoins as collateral to take loans up to $1 million.
- Customers will be eligible to take a loan equivalent to 40% of the value of their Bitcoin.
- Interest is set at an 8% annual rate, with minimum monthly payments of $10.
Coinbase, the 2nd largest cryptocurrency exchange has introduced a new borrow/loan feature on its platform. Eligible customers can now take up to $1 million in loans using their Bitcoin as collateral.
Initially, this feature will only be available for the customers in 20 US states, but Coinbase plans to soon roll out this feature to the entire US market. In their official statement, Coinbase explained that eligible customers can take a credit loan without any prior credit checks. Customers will be able to take a maximum loan of 40% of the value of their Bitcoin, with the highest limit of $1 million.
How does the Coinbase loan structure work?
With this new function, customers will be required to pay a monthly interest amount, which is calculated at an 8% annual rate of the borrowed amount. The minimum amount of monthly payment is $10.
The outstanding balance can be paid by the customer whenever they’re ready, as their collateralized Bitcoins will be stored safely on Coinbase. The loaned amount will also have instant deposit features to the customers linked bank account or PayPal, with no additional fees.
For customers in the US state of Connecticut (CT), Coinbase will also offer fixed-term loans. Eligible customers can take cash loans on a one-year basis, equivalent to 30% of their Bitcoin value. The maximum amount of fixed-term loans per customer will be $100,000.
In their official statement, Coinbase also stated that the customer’s loan information or any related activity won’t be reported to credit or private audit agencies for now. However, it’s safe to assume that this clause might change in the future due to regulations in some US states.
Enabling a wider adoption of Bitcoin
Allowing customers to use Bitcoin as collateral will most likely increase the adoption of Bitcoin in the US. The growing potential of Bitcoin means that most investors or holders of the cryptocurrency are in for the long haul.
The current growth rate and the market cap of Bitcoin suggest that the most popular cryptocurrency in the world will cross the $100K mark at some point. So most investors will look to hold BTC for the long term.
With this new borrow feature from Coinbase, BTC holders can now take large amounts of cash loans, without necessarily going to the banks, paying insane interest rates, or staking their tangible assets like land, house, or car. This can really become a sustainable credit solution for Bitcoin investors in the US.