Coinbase has withdrawn its plans to launch a USDC APY lending program on the platform in response to mounting legal pressure from regulators, according to an update to a blog post from months ago.
The SEC Compromises with Coinbase
Coinbase quietly announced the news on Friday, updating a blog post from June that announced an upcoming lending product. The team has now discontinued its waitlist, which attracted hundreds of thousands of American customers after encouraging users to pre-enroll for its program.
The update states, “Our goal is to create great products for our customers and to advance our mission to increase economic freedom around the world.” “As we work to gain regulatory clarity for the entire crypto industry, we’ve made the difficult decision not to launch the USDC APY program announced below.”
Coinbase appears to be acting in accordance with statements made by CEO Brian Armstrong on Twitter earlier this month, citing “regulatory clarity” as a reason to put the lending service on hold.
Despite his company’s numerous attempts to comply and communicate with the SEC, he blasted the SEC’s difficulty and lack of clarity on regulatory requirements on September 7th. This came after the Securities and Exchange Commission threatened to sue Coinbase over the aforementioned lending program, a decision with which Armstrong strongly disagreed but agreed to comply.
Coinbase promised to keep bringing “innovative, trusted programs and products” to the market at the end of the update.
The Difficulty of Defining Security
A disagreement over what constitutes a “security” is at the heart of Armstrong and the SEC’s feud. Lend, the program in question, would have paid Coinbase users 4% APY on their USDC holdings.
While the SEC considers Lend to be a security, Armstrong sees it as nothing more than a lending product for which precedent has already been established.
For the cryptocurrency industry in the United States, the SEC has proven to be a difficult stumbling block. Businesses have applied to the regulator numerous times for lending products and exchange-traded funds (ETFs), both of which their Canadian neighbors have readily accepted.