Coinbase announces bitcoin secured loan service
For now, the novelty will be implemented in 20 states in the United States.
The minimum limit for taking out a loan is 40% of the total amount that the client has in BTC kept at the brokerage house. On the other hand, the maximum limit is $1 million.
When taking out the loan, the BTC used as collateral will be blocked and stored in Coinbase Custody, the exchange’s custody service. During the term of the contract, the exchange will not make loans or any transaction with the cryptocurrencies.
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“Selling Bitcoin can lead to capital gain taxes. Borrow from Coinbase and have cash on hand without having to sell your Bitcoin,” says the Coinbase ad.
There is no fee charged to take out the loan, only the interest rate on the payment, which will be 8% per year.
The customer will also not need to do any credit checks on their name. This is because the loan has a high liquidity guarantee. Therefore, in the event of default on installments, the exchange can mitigate credit risk through the ease of executing the loan.
Regarding the means of payment, the customer will make monthly payments equivalent to the amount of interest on the loan. The minimum amount of the monthly installment is $10. The principal amount can be deducted later, as the investor has access to resources to pay it.
According to the company, the service is aimed at customers who need quick cash but don’t want to sell their BTC. This way, the investor can avoid losing money by selling low, or else having to pay capital gain tax.