Coinbase is planning to sell a $1.5B debt fund to grow the company balance sheet for various corporate programs like future product development and potential acquisitions.
The Nasdaq-listed crypto exchange, revealed that the debt will be in the form of senior notes that will be due in 2028 and 2031. It, however, did not close the detailed terms of notes like the interest rates and redemption provisions. This will fall in place depending on the discussions between the firm and the initial purchases.
Coinbase Inc, a Coinbase subsidiary that acts as its holding company, will fully guarantee the offered notes. The notes and the guarantee would then only be offered and sold through a private offering memorandum to qualified institutional buyers in line with the local securities laws and outside the US.
The exchange also clarified, “Neither the notes nor the related guarantee have been or will be, registered under the Securities Act or the securities laws of any other jurisdiction, and unless so registered, may not be offered or sold in the United States, except pursuant to an applicable exemption from such registration requirements.”
Increased SEC Scrutiny
The release of the plans of the debt offering comes at a time when Coinbase is facing increased scrutiny from the US Securities and Exchange Commission (SEC). The financial regulator is threatening to sue the company over its upcoming lending program. The program known as Lend would let users lend assets and gain interest from them.
Coinbase feels they are unfairly targeted by this threat. The Chief Legal Officer of Coinbase, Paul Grewal in a blog post wrote on the need for a healthy regulatory environment. He opined the need for the regulatory authority to provide an explanation for their actions and that dialogue is at the heart of good regulations.
Coinbase, however, is not exclusive when it comes to the SEC. The regulatory authority has been in the case of the other crypto exchanges. Binance, in particular, has been on the receiving end of the regulator. Worse for Binance, it has additional concerns from various jurisdictions around the world. For example, a London court recently ordered it to trace a $3.2million hack from its platform.
What does Coinbase raising $1.5 billion in debt mean for the crypto world?
The fact that Coinbase is able to raise $1.5B in debt is a sign that blockchain has attained mainstream status. With the main target of the offer being qualified institutional investors, it’s clear that cryptos are becoming an ideal asset of investment for most institutions. This should be a testimony to the assured crypto future.
At the same time, Coinbase offering the debts in the form of unregulated notes shows the gulf that exists in the crypto regulation sphere. The firm also promised that the notes are not and will not be registered with any regulatory authority from any jurisdiction. That is to mean, it might take some time before the government can fully control crypto.
