Coinbase has decided to scrap its plan to offer customers a digital asset lending platform rather than risk a legal showdown with the U.S. Securities and Exchange Commission.
The crypto firm’s decision not to proceed with the Coinbase Lend product came less than two weeks after Coinbase blasted the SEC for engaging in “intimidation tactics” and disclosed it had received a Wells notice indicating the agency intended to sue Coinbase if the product goes live.
Chief Legal Officer Paul Grewal said Coinbase would not be launching Lend until at least October, citing the lack of “regulatory clarity.”
But in a blog post Friday, Coinbase announced that “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 [Lend] program.”
“We had hundreds of thousands of customers from across the country sign up and we want to thank you all for your interest. We will not stop looking for ways to bring innovative, trusted programs and products to our customers,” the company said.
With Lend, Coinbase was seeking to compete with popular decentralized finance (DeFi) products such as Compound and Aave. The platform would have allowed customers holding a stablecoin called USD Coin to earn interest starting at 4% APY by lending it to other traders.
“Having to shelve Lend is a major blow for Coinbase as the firm tries to diversify revenue beyond its trading fees,” Fortune said. “The company is also playing catch-up to competitors such as BlockFi Lending LLC, which are already offering higher yielding products.”
Under its new chair, Gary Gensler, the SEC has taken a tougher line on crypto products and the platforms they trade on. Coinbase has insisted that Lend would not be an investment contract subject to investor-protection laws.
“If we end up in court we may finally get the regulatory clarity the SEC refuses to provide,” Coinbase CEO Brian Armstrong said on Sept. 7 in a Twitter thread. “But regulation by litigation should be the last resort for the SEC, not the first.”
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