Ben Strack

<div id="highlights-block_6148d98c268e5" class="highlights">
 <ul>
 <li>The program would have allowed eligible customers to earn 4% annual percentage yield on USD Coin (USDC)</li>
 <li>“We will not stop looking for ways to bring innovative, trusted programs and products,” Coinbase stated in a blog, noting that hundreds of thousands of customers had signed up for the planned offering</li>
 </ul>
 
</div>



<a href="https://www.coinbase.com/plp/nar3?utm_source=google_search_b&amp;utm_medium=cpc&amp;utm_campaign=1711534994&amp;utm_content=68048698078&amp;utm_term=coinbase&amp;utm_creative=496621138230&amp;cb_device=c&amp;cb_placement=&amp;cb_country=us&amp;cb_city=open&amp;cb_language=en_us&amp;gclid=CjwKCAjw4qCKBhAVEiwAkTYsPN55ZtG2S1sogSJIL4Vv17Og6ZsXVJK6HFpaAtF24eIqk1AoK3_E3xoCPV8QAvD_BwE" target="_blank" rel="noreferrer noopener">Coinbase</a> is putting on hold its plans to launch a lending program that would provide users the ability to earn interest on lended assets after reportedly facing pressure from US regulators.



The company said in <a href="https://blog.coinbase.com/sign-up-to-earn-4-apy-on-usd-coin-with-coinbase-cdad79e5f5eb" target="_blank" rel="noreferrer noopener">a blog post</a> on Friday that it was making “the difficult decision” not to launch the initiative, which would have allowed eligible customers to earn interest on select assets on Coinbase, starting with 4% annual percentage yield, or APY, on USD Coin (USDC). Coinbase has also discontinued the waitlist for this 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 Sept. 17 Coinbase blog states. “We will not stop looking for ways to bring innovative, trusted programs and products to our customers.”



A spokesperson for Coinbase declined to comment further.&nbsp;&nbsp;



Coinbase had revealed plans for the program in a June blog post. The company wrote at the time that the national average for a traditional savings account hovers around 0.07%, with high-yield savings accounts falling short of even 1%. Thus by lending to Coinbase USDC, a stablecoin that can always be redeemed one-to-one for $1, users can earn eight times the national average of high-yield savings accounts, the post added.



Paul Grewal, Coinbase’s chief legal officer, said in a Sept. 7 blog that the SEC sent the company a Wells notice, which he noted is the official way a regulator tells a company that it <a href="https://cms.blockworks.co/the-sec-will-sue-coinbase-if-it-launches-lend/">intends to sue.</a> The SEC told Coinbase they consider Lend to involve a security, he added, but refused to share details on why or how they’d reached that conclusion.



An SEC representative declined to comment on Coinbase’s previous intention to launch the lending service or its latest plans to cancel them.&nbsp;



<blockquote class="wp-block-quote is-layout-flow wp-block-quote-is-layout-flow">“We could have simply launched the product but we chose not to,” Grewal wrote at the time. “This is far from the norm in our industry. Other crypto companies have had lending products on the market for years, and new lending products continue to launch as recently as last month.”</blockquote>



Crypto exchange Gemini currently offers <a href="https://support.gemini.com/hc/en-us/articles/360055836212-What-is-Gemini-Earn-" target="_blank" rel="noreferrer noopener">Gemini Earn</a>, a lending program through which users can lend their crypto to certain institutional borrowers and earn interest.



Matthew Gould, founder and CEO of <a href="https://unstoppabledomains.com" target="_blank" rel="noreferrer noopener">Unstoppable Domains</a>, told Blockworks that Coinbase withdrawing these plans is just the latest example of how lack of regulatory clarity in the US is slowing innovation and preventing consumers from accessing new and useful products. 



New Jersey, Alabama and Texas each <a href="https://cms.blockworks.co/regulators-are-coming-for-crypto-heres-how-firms-are-reacting/" target="_blank" rel="noreferrer noopener">filed complaints in July</a> alleging that New Jersey-based BlockFi was offering unregistered securities to clients through its high-yield interest account service. BlockFi has argued that the product is not a security.



“My hope is that government leaders are listening to the industry and will respond with a more transparent approach to the crypto sector,” he said. “The first rule of regulation needs to be &#8216;do no harm to consumers.&#8217; Right now it feels like regulators are instead pursuing a &#8216;stop everything while we figure this out&#8217; approach without clearly communicating their needs.&#8221;



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Are you a UK or EU reader that can’t get enough investor-focused content on digital assets?<a target="_blank" href="https://cms.blockworks.co/events/das-london/" rel="noreferrer noopener">Join us</a>&nbsp;in London on November 15th and 16th for the Digital Asset Summit (DAS) London. Use code ARTICLE for £75 off your ticket.&nbsp;<a target="_blank" href="https://cms.blockworks.co/events/das-london/" rel="noreferrer noopener">Buy it now</a>.



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Coinbase Cancels Plans to Launch Lending Program

Casey Wagner

<div id="highlights-block_6138aad0a4142" class="highlights">
 <ul>
 <li>Coinbase said that the SEC threatened legal action if the exchange goes ahead with plans to launch a lending program</li>
 <li>Coinbase approached the SEC with its plans six months ago in the hopes of getting ahead of regulatory hurdles </li>
 </ul>
 
</div>



The US Securities and Exchange Commission intends to take legal action against Coinbase if the exchange follows through with plans to launch Lend, a program that would allow users to earn interest on lended assets, the company revealed late Tuesday.&nbsp;



“As surprised as we were at the SEC’s threat to sue without ever telling us why, we want to be transparent with you about the course of events leading up to it,” Paul Grewal, chief legal officer of Coinbase wrote in a <a href="https://blog.coinbase.com/the-sec-has-told-us-it-wants-to-sue-us-over-lend-we-have-no-idea-why-a3a1b6507009" target="_blank" rel="noreferrer noopener">blog post</a> Tuesday.&nbsp;



The SEC issued Coinbase a Wells notice, a formal statement sent to individuals or firms when an enforcement action can be expected, on September 1, according to the exchange.&nbsp;&nbsp;



Coinbase is not the first exchange to venture into the lending space, but the exchange claims to be one of the few that sought SEC approval prior to launch. Coinbase has been in contact with regulators about the Lend product for the past six months, the company said.&nbsp;



“We could have simply launched the product but we chose not to. This is far from the norm in our industry,” Grewal said. “Other crypto companies have had lending products on the market for years, and new lending products continue to launch as recently as last month. But Coinbase believes in the value of open and substantive dialogue with our regulators.”



The SEC is claiming that the lending feature is classified as a security, Coinbase said. When asked for clarification, Grewal said that Coinbase was given no further explanation.&nbsp;



“They refuse to tell us why they think it&#8217;s a security, and instead subpoena a bunch of records from us (we comply), demand testimony from our employees (we comply), and then tell us they will be suing us if we proceed to launch, with zero explanation as to why,” Brian Armstrong, co-founder and CEO of Coinbase wrote on <a href="https://twitter.com/brian_armstrong/status/1435439621190471683?s=20" target="_blank" rel="noreferrer noopener">Twitter</a>.&nbsp;



Coinbase was offered the opportunity to submit a written defense of Lend, but Grewal said this would be difficult given the company’s lack of understanding of the reason for the lawsuit.&nbsp;



“This is ‘Regulation via Litigation.’ They aren&#8217;t capable of working through this themselves and are afraid of making mistakes in doing so,” Mark Cuban, Dallas Mavericks owner and investor, wrote on <a href="https://twitter.com/mcuban/status/1435454959441620995" target="_blank" rel="noreferrer noopener">Twitter</a> in response to the news. “They leave it to the lawyers. Just the people you don&#8217;t want impacting the new technologies.&nbsp; You have to go on the offensive.”&nbsp;



The launch of Lend will be delayed until at least October as a result of the Wells notice, Grewal said. Armstrong and Grewal both said that users will be kept updated through this process, but it is currently unclear if or when litigation will begin.&nbsp;



The news comes amid a tumultuous regulatory environment for digital assets as US officials continue to <a href="https://cms.blockworks.co/secs-gensler-crypto-needs-regulation-to-survive/" target="_blank" rel="noreferrer noopener">threaten the industry</a> with new restrictions.&nbsp;&nbsp;



“But today all we know is that we can either keep Lend off the market indefinitely without knowing why or we can be sued,” said Grewal. “A healthy regulatory relationship should never leave the industry in that kind of bind without explanation. Dialogue is at the heart of good regulation.”&nbsp;



Are you a UK or EU reader that cant get enough investor-focused content on digital assets?<a target="_blank" href="https://cms.blockworks.co/events/das-london/" rel="noreferrer noopener">Join us</a>&nbsp;in London on November 15th and 16th for the Digital Asset Summit (DAS) London. Use code ARTICLE for £75 off your ticket.&nbsp;<a target="_blank" href="https://cms.blockworks.co/events/das-london/" rel="noreferrer noopener">Buy it now</a>.