Coinbase is set to launch spot borrowing with leverage of up to 10x, allowing eligible traders to borrow against collateral to purchase cryptocurrency on spot markets. However, US customers who do not meet the criteria as Eligible Contract Participants will not have access to this service.
The exchange’s announcement on Oct. 7 indicates that the rollout will happen in the coming weeks. Availability will be subject to customer eligibility and specific jurisdictions, although Coinbase has not disclosed which countries are included. Therefore, it cannot be assumed that the service will be available to every trader outside the US.
In the US, individuals must meet certain criteria outlined by a 2021 statement from a commissioner at the CFTC, the US derivatives regulator. These criteria include discretionary investments exceeding $10 million in aggregate or exceeding $5 million for risk management purposes. This places the planned spot borrowing service beyond the reach of ordinary US retail customers.
It’s important to note that the restriction applies specifically to spot borrowing, and Coinbase clarifies that the product is offered by its affiliates and is separate from Coinbase Financial Markets, which offers derivatives in the US.
For US customers, the margin lenders will be Coinbase Custody International Limited or Coinbase Credit, Inc. Traders will manage spot borrowing and derivatives exposure through a shared margin portfolio.
Coinbase recently completed the migration from Deribit on Oct. 2, signaling its expansion. The introduction of spot-margin borrowing provides a unique borrowing option for eligible customers.
Those who qualify for the service will have access to leverage of up to 10x on major assets and 5x on other supported assets. Traders can post collateral in over 15 supported assets, with the holdings remaining on Coinbase. Real-time visibility of loan balances, collateral levels, and margin health will be available for open borrows.
It’s important to be aware that keeping collateral on the platform does not shield it from liquidation. Coinbase warns that borrowing for trading can amplify both gains and losses, collateral can be liquidated without warning, and losses may surpass the initial deposit.
Specific details such as borrowing rates, collateral valuation haircuts, applied discounts to pledged assets, and liquidation thresholds have not been disclosed in the announcement. These terms will determine the cost of utilizing the service and when collateral is at risk.
