Coinbase drops plans to launch interest product after CEO’s SEC comments
Monitors display Coinbase signage during the company’s initial public offering (IPO) at the Nasdaq MarketSite in New York, U.S., on Wednesday, April 14, 2021.
Getty Images Coinbase has decided to halt its plans to launch an interest-earning product two weeks took the SEC to task on Twitter for its lack of guidance on the matter.| Bloomberg | Getty Images
Coinbase has decided to halt its plans to launch an interest-earning product two weeks after CEO Brian Armstrong took the SEC to task on Twitter for its lack of guidance on the matter.
On Friday’s blog update, Coinbase Lend stated that Coinbase would not be launching Coinbase Lend. It will allow customers to earn an annual percentage yield of 4% on USDC stablecoin USDC. Coinbase could lend the funds to verified borrowers. Coinbase also ended its waiting list for this product.
Coinbase Shares fell by more than 5% on Monday. The stock, which tends to follow cryptocurrency prices since its revenue is so closely tied to trading, has also been rocked by the broader crypto market sell-off. Bitcoin prices fell by as much as 10% on Monday.
According to the post, “Hundreds of thousands of users signed up across the country and we are grateful for all your support.” “We won’t stop searching for new, trusted products and programs to offer our customers,” the post stated.
Coinbase representatives declined to comment other than the blog content. An SEC request for comment was not answered immediately.
On Sept. 7 Armstrong suggested in a tweet storm that the Securities and Exchange Commission had been vague and seemingly unwilling to provide guidance and clarity for Coinbase, which had planned to launch the interest-earning product this month and then delayed it until October and made efforts in earnest to keep an open conversation with Washington. The SEC had sent a Wells Notice to the company regarding the interest product. They threatened to sue Coinbase for not allowing the launch to proceed.
SEC Chairman Gary Gensler testified last week the agency is taking a hard look at crypto-related assets to determine whether they do come under securities laws and has made no secret of interest in increasing regulation of the space.
Coinbase’s product proposal has been likened to a bond. This would make the proposed product subject to SEC scrutiny.
Recent weeks have seen investor anxiety about regulation of stablecoins increase. Coinbase’s announcement Friday coincided with a New York Times report that the Financial Stability Oversight Council could designate stablecoins as systemically risky, like major banks, which would subject them and their operators to increased regulatory requirements and scrutiny.
By linking their market values to an external asset such as the U.S. Dollar, stablecoins can be considered digital currencies that are less volatile than other cryptocurrency. These digital currencies have become increasingly popular for their ability to generate yield from complex and popular decentralized finance activities, such as DeFi.
The President’s Working Group on Financial Markets is also working up a report on stablecoins, and the Federal Reserve is expected to put out a paper on central bank digital currencies this month that could touch on risks presented by stablecoins.