Coinbase Bows Out from Launching Lending Program After SEC’s Lawsuit Threat

Cryptocurrency exchange Coinbase said it decided to halt its plans to launch an interest-earning product. On its blog website, the platform stated it would not launch Coinbase Lend. The development comes a few weeks after the SEC threatened to sue Coinbase if it proceeded with its program. As a result, it stops the exchange from allowing users to earn interest by lending digital assets. 

CEO Brian Armstrong had taken the U.S. regulators to task on Twitter for its lack of guidance on the matter. In a tweet-long thread, Armstrong accused the regulatory authority of some “really sketchy behavior,” adding that it refused to meet with him in Washington earlier this year. Coinbase aggressiveness with the Securities and Exchange Commission didn’t last too long.

Last week SEC Chairman Gary Gensler testified that the agency is investigating crypto-related assets. They wanted to determine whether they come under securities laws. Also, they made no secret of interest in increased regulation of the space.

Coinbase Lend

Coinbase Lend would let eligible users earn an annual percentage yield of 4% on the stablecoin USDC. This would be possible by digital lending assets. The exchange noted that it had seen a rise in crypto interest accounts in recent times. Initially, the firm wanted to give a principal guarantee of USDC to lenders in their Coinbase account. The platform has now discontinued its waitlist for the product too.

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Coinbase’s blog post said that they’d made the difficult decision to halt the USDC APY program as they proceeded to seek regulatory clarity for the general crypto industry.

They added that hundreds of thousands of customers from across the country signed up. So, they want to appreciate their interest. They promised they would not stop looking for ways to bring their customers innovatively, trusted programs and products.

Is the SEC Protecting Investors?

For a while now, the SEC has long complained about the limited resources at its disposal. The regulatory authority has pursued a limited set of cases against crypto products. However, they are not happy that users were essentially forfeiting custody of their coins to Coinbase and its partners. They also specified to Coinbase that their product did indeed involve security.

Coinbase affirms that it corresponds closely with the regulatory bodies as part of its brand. They tried to take procedures gradually while sticking to their belief that the product wasn’t security-related.

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Brian Armstrong recently said the SEC’s goal is to protect investors and form fair markets. However, he was not sure who they were protecting here and where the harm was. Moreover, he had observed that the community was happy to be earning yield on these products across several crypto platforms.