Coinbase Global Inc, a leading cryptocurrency exchange company in the US, announced plans to launch a debt offering. The exchange’s recent update stated that the company had increased its debt offering to around $2 billion.
The firm had previously announced that the debt offering would be worth around $1.5 billion. The recent increment is because of increased investor interest in the scheme.
Strong Demand for the Bonds
A report by Economic Times stated that orders worth around $7 billion were placed on seven and ten-year bonds. The interest rates for these bonds were 3.375% and 3.625%, respectively.
The publication also stated that the provided interest rates were lower than what the company was initially offering. The surging demand caught the company by surprise, as it showed that investors were highly optimistic about its creditworthiness.
The junk bonds being offered by Coinbase are usually issued by a company that lacks an investment-grade credit ranking. Because they are risky, junk bonds come at a higher interest rate than bonds from corporations with an investment-grade ranking.
Coinbase is the second-most popular crypto-based firm to issue junk bonds. MicroStrategy completed a junk bond offering in June where it issued $500 million notes to aid the firm in accumulating more Bitcoin during the dip that happened that month.
According to an announcement by Coinbase, funds raised from the debt offering will be used for “potential investments in or acquisitions of other companies, products or technologies.”
Coinbase at Odds with SEC
On September 7, Coinbase published a blog post stating that the US Securities and Exchange Commission (SEC) was threatening to sue the exchange over a digital asset lending program.
According to the exchange, it received a Wells Notice from the regulator despite being proactive in engaging the commission in the roadmap that led to the development of the Coinbase Lend program.
The Coinbase lending program would allow eligible traders to earn interest by lending selected assets on the exchange. The planned interest rate for the program starts at 4% Annual Percentage Yield (APY) on the USD Coin (USDC). Because of the Wells Notice, the exchange suspended the program’s launch.
Coinbase CEO, Brian Armstrong, stated that the SEC classified lending as security. However, Coinbase states that Lend is not an investment contract because customers are lending UDSC Coin that they already hold in their Coinbase accounts. Hence, these customers already have an existing relationship with the exchange.
Following the threat, the exchange has been forced to halt the program’s launch until it gets due approval.