In an update to a blog post from months prior, Coinbase has withdrawn its plans to launch a USDC APY lending program on the platform in response to mounting legal pressure from regulators.
Coinbase Bends to the SEC
The news was quietly released this Friday when Coinbase updated its June blog post that announced an upcoming lending product. After encouraging users to pre-enroll for its program, the team has now discontinued its waitlist, which attracted hundreds of thousands of American customers.
“Our goal is to create great products for our customers and to advance our mission to increase economic freedom in the world,” reads the update. “As we continue our work to seek regulatory clarity for the crypto industry as a whole, we’ve made the difficult decision not to launch the USDC APY program announced below.”
Citing “regulatory clarity” as a reason to table the lending service, Coinbase appears to be acting in line with statements made by CEO Brian Armstrong on Twitter earlier this month.
On September 7th, he blasted the SEC’s difficulty and lack of clarity on regulatory requirements, despite his company’s numerous attempts to comply and communicate with them. This was after the SEC threatened to sue Coinbase over the aforementioned lending program – a decision with which Armstrong heavily disagreed but nevertheless agreed to follow.
At the end of the update, Coinbase still promised to keep bringing “innovative, trusted programs and products” to the market.
The Trouble of Defining a Security
At the heart of Armstrong and the SEC’s dispute is a disagreement on what constitutes a “security.” The program in question – Lend– would have offered Coinbase users 4% APY on their USDC offerings.
While the SEC considers Lend to involve securities, Armstrong sees it simply as a lending product for which precedent has already been set numerous times.
The SEC has proven a difficult hurdle to overcome for the cryptocurrency industry in the United States. Businesses have applied with the regulator numerous times for both lending products and ETFs to no avail – both products which their neighbors in Canada have readily accepted.