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Coinbase Bitcoin Loans May Put Healthy Collateral at Risk After Maturity

(8 days ago) · 1 source · Summarized by CryptoBipto

An analysis has found that Coinbase's fixed-rate Bitcoin-backed loans may expose borrowers' collateral to risk even when the collateral remains healthy, specifically after the loan reaches maturity. The issue relates to how the loan terms handle collateral once the repayment period ends.

WHY IT MATTERS

When you borrow money using crypto as collateral, it works a bit like a pawn shop: you hand over something valuable (in this case, Bitcoin) and get cash in return. Normally, the pawn shop can only sell your item if its value drops too low compared to what you borrowed. But this report suggests that once the loan period ends at Coinbase, the rules may change, and your Bitcoin could be at risk even if it is still worth plenty. For anyone new to crypto lending, this is a reminder to carefully read the fine print, especially the parts about what happens when the loan period is over.

Coinbase offers a lending product that allows users to borrow against their Bitcoin holdings at a fixed interest rate. According to a report, the terms of these loans may create a situation where borrowers' Bitcoin collateral can be liquidated or otherwise put at risk after the loan's maturity date, even if the value of the collateral has not declined below typical liquidation thresholds.

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SOURCES

  • cryptoslate.com

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