In light of the SEC suing Coinbase, CEO Brian Armstrong announced that Coinbase won't be pursuing the roll-out of its lending product, "Lend." The company has discontinued the waiting list for Lend. Having announced the prospective lending program back in June, users were excited at the prospect of earning a yield that's higher than most banks offer.
The program set to launch was Coinbase's USDC APY (annual percentage yield) program where Coinbase would incentivize users who held stable coin, USDC, for 4 percent interest on selected crypto assets. However, the SEC didn't take to this product. Lend would compete with rates from centralized banks. It was also a product that was centered around lending. SEC Chairman Gary Gensler isn't a fan of lending.
Coinbase persisted on complying, but wasn't given any guidance.
Despite complying with the SEC's seemingly baseless requests, Coinbase decided not to take the heat from the SEC threats. Stating that the crypto-lending product is a violation of securities its securities law, the SEC struck its iron hammer with a crypto crackdown and threatened Coinbase with a lawsuit if it pursued the program.
Interestingly enough, the SEC hadn't provided much guidance to Coinbase in the months leading up to the threat. Coinbase revealed that it has been left in the dark about how and why its new product violates the compliance frame. It's as if the silent treatment the SEC gave Coinbase was a passive-aggressive attempt to slowly get Coinbase to wilt under its pressure.
Unfortunately, hundreds of thousands of users across the country won't be able to take advantage of the USDC APY program. Coinbase has assured its users that it will now use this time to continue to "bring innovatively, trusted programs and products to our customers."
The SEC hasn't release an official statement about the allegations imposed against Coinbase.
Much like the Senate's Infrastructure Bill, a core aspect of these persistent battles with the SEC and cryptocurrency regulation is the verbiage used. Many people in the crypto community continue to criticize administrators and regulators for the propensity to act on topics they don't fully understand or engage with. Some crypto natives are even digging through the archives and finding claims of Gensler stating back in 2018 that a majority of crypto markets are in fact, not securities, but commodities.
However, Gensler has remained silent. Armstrong recounted his experience with the SEC. He said, “They refuse to tell us why they think it’s a security, and instead subpoena a bunch of records from us (we comply)." Apparently, even after continuously reaching out, the SEC didn't provide any explanation as to why it considers Lend to be a security and still to this day haven't made any comment about the litigation threat.
Armstrong did get the support of several crypto enthusiasts like billionaire Mark Cuban to take the SEC to court. Despite the words of advice, Coinbase will be abandoning its proposed plans for "Lend." The company has already announced a new development—Coinbase Institutional, which is a comprehensive platform for institutional investors.