Coinbase, the largest cryptocurrency exchange in the United States, has abandoned plans to offer its high-yielding “Lend” product in response to the Securities and Exchange Commission’s threat to sue the exchange if it did so.
Coinbase Chief Legal Officer Paul Grewal disclosed earlier this month in a blog post that the company had received a Wells notice — a formal letter announcing the regulator’s intention to sue — from the SEC regarding the company’s plan to launch Lend, which would allow Coinbase customers to earn a relatively high annual percentage yield (APY) on select Coinbase tokens, starting with a 4% APY on USD Coin (USDC). According to Coinbase, the SEC stated that it viewed the Lend product to be a security, but provided no further details or justification.
However, Coinbase stated in a Sept. 17 blog post update that it will not launch Lend. Coinbase stated that it had made the “tough choice” not to start the previously announced USDC APY program and has withdrawn from the program’s waitlist. “We had hundreds of thousands of clients sign up from across the country, and we want to express our gratitude,” the message stated. “We will never stop exploring ways to provide our clients with new, reliable programs and products.”
Related: Coinbase Registers To Trade Futures And Derivatives
Coinbase’s silent discontinuation stands in stark contrast to the tweetstorm that Coinbase CEO Brian Armstrong sparked earlier this year when he took to social media to express his outrage over the SEC’s threat to sue the company over the product. The Nasdaq-listed exchange’s stock price has fallen more than 8% from US$258.20 on Sept. 8 to US$236.53 today.
Customers have been drawn to cryptocurrency yield products by the greater rates offered in comparison to standard bank savings accounts. Apart from Coinbase, the Winklevoss brothers’ cryptocurrency exchange Gemini also offers a yield-earning product. However, regulators in the United States have been increasingly focused on such items. Securities regulators in New Jersey and Texas have ordered BlockFi and Celsius Network to discontinue marketing interest-bearing cryptocurrency contracts.
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