Coinbase, the largest cryptocurrency exchange in the United States, has dropped its plans to launch its high-yield-generating “Lend” product following the U.S. Securities and Exchange Commission’s threat to sue the exchange if they did.
Fast facts
- Coinbase Chief Legal Officer Paul Grewal disclosed in a blog post earlier this month that the company had received a Wells notice — a formal letter announcing the regulator’s intention to sue — from the SEC over the plan to launch Lend, which would allow Coinbase customers to earn a relatively high annual percentage yield (APY) on select tokens on Coinbase, starting with 4% APY on USD Coin (USDC). According to Coinbase, the SEC had said it considered the Lend product to involve a security, but did not explain how or why.
- But in a Sept. 17 update to the blog post, Coinbase now says it will not launch Lend. Coinbase said it had made “the difficult decision” not to launch its previously announced USDC APY program and has discontinued the waitlist for the program. “We had hundreds of thousands of customers from across the country sign up and we want to thank you all for your interest,” the post read. “We will not stop looking for ways to bring innovative, trusted programs and products to our customers.”
- Coinbase’s quiet cancellation comes in sharp contrast to the earlier tweetstorm its CEO Brian Armstrong unleashed when he took to social media to complain about the SEC’s threat to sue Coinbase over the product. The Nasdaq-listed exchange has seen its share price take a tumble of over 8% from US$258.20 on Sept. 8 to US$236.53 today.
- Cryptocurrency yield products have been gaining popularity with customers attracted by the higher yields offered compared to interest from saving accounts with traditional banks. Apart from Coinbase, crypto exchange Gemini, founded by the Winklevoss twins, also has a yield-earning product. But U.S. regulators have been increasingly turning their attention to such products. U.S. crypto lending platforms BlockFi and Celsius Network have been ordered to cease offering interest-earning cryptocurrency products by securities regulators in New Jersey and Texas.