CoinLoan, the Estonia-based cryptocurrency secured lending platform, has temporarily lowered the withdrawal threshold for lenders amid the current market turmoil.
According to announcement, it is not a complete block, but a cut. Now, platform users will only be able to withdraw up to $5,000.
Coinloan lowered withdrawal limits due liquidity protection
The case of CoinLoan is similar to that of other platforms, especially Celsius Network, which in fact blocked cryptocurrency withdrawals. And as in this case, the lack of market liquidity led CoinLoan to block withdrawals.
While companies like Three Arrows Capital (3AC), Voyager and BlockFi have run into trouble, CoinLoan has tried to distance itself. In this regard, the company stated that it had no exposure to LUNC nor stETH tokens, as its policy prohibits investments in “risky activities”.
CoinLoan also added that it has not invested in 3AC clients’ funds remain safe. However, the company claimed that the issues affecting companies like Celsius, Voyager, BlockFi and Three Arrows Capital have triggered a wave of looting on its platform.
“The interest we pay is generated by issuing over-collateralized loans to other users of the platform. Therefore, in some cases, the estimated date of a complete withdrawal of assets from interest accounts comes before, not after, the loan closes,” CoinLoan said.
But even with all these protections, the wave of looting seems to have affected the company as well. After all, as customers withdraw their funds, the platform’s liquidity disappears.
As such, the company imposed the withdrawal cap “to balance fund flows and avoid liquidity-related disruptions.” Customers are now restricted to a maximum withdrawal limit of $5,000 every 24 hours, according to CoinLoan.
Problems with loans
In addition to offering interest, CoinLoan also allows customers to take out loans and leave cryptocurrencies as collateral. The company’s service works with both BTC and ETH.
To take out the loan, customers need to offer a guarantee (LTV) that can range from 20% to 70% of the borrowed amount. The lower the LTV, the lower the interest, but also the higher the security in cryptocurrencies that the user must leave.
Therefore, the company allows customers to leave their cryptocurrencies and offers a remuneration (interest) for it and, simultaneously, earns interest when making their loans to other customers. Each loan yields between 4.95% and 11.95% per annum of remuneration for the company.
The CoinLoan team said they preferred to reduce withdrawals rather than block them out of respect for customers, allowing them to withdraw at least a portion of the amount invested.
“We understand that some of you have left your entire savings on CoinLoan, so we cannot simply turn withdrawals off. Thus, we are just lowering the limit, so you can withdraw a part of your equity if necessary”, explained the company.