Coinbase has scrapped its proposed interest-bearing crypto accounts less than two weeks after chief exec Brian Armstrong posted an aggressive Twitter thread accusing the US Securities and Exchange Commission (SEC) of “sketchy behavior.”
Coinbase Lend would’ve offered interest rates of up to 4% on so-called stablecoins. The top US exchange proclaimed Lend boasted “higher interest without higher risk.”
As it is, the project will be shuttered and the waitlist nixed.
The decision to stop the program is a speedy (and quiet) about-face from the multi-billion dollar, freshly NASDAQ-listed company.
Coinbase stock, which had briefly rallied before news of its Wells Notice became public, is now trading at $238 — 15% lower than in early September.
A Wells Notice is a formal letter stating that the SEC or the US Financial Industry Regulatory Authority (FINRA) plan on bringing civil legal action against a company or individual.
While the notice isn’t a lawsuit, it is confirmation that:
- an investigation has concluded,
- the regulator sees issues,
- and the respondent can argue their case before a lawsuit arrives.
Historically, receiving a Wells Notice has meant companies will soon end up paying a civil penalty, or appear in court facing off against a US regulator.
But the Delaware-headquartered exchange could be attempting to avoid these repercussions by recalling its lending product.
In an update to Coinbase’s Medium (which wasn’t announced or commented on by the executive leadership), the exchange stated it’s “not launching the USDC APY program,” and claims it “will not stop looking for ways to bring innovative […] products to customers.”
Coinbase needs more than trading fees
Interestingly, Coinbase Lend would’ve seen the leading US exchange transition from generating revenue almost entirely from spot trading fees — no doubt music to the ears of shareholders.
Coinbase has been trying to move its offering away from the trading-fees-only model. Just last week, it lodged an application with the National Futures Association (NFA), indicating its only other accessible idea is to launch crypto derivatives.
So, with Lend officially shelved, it looks like Coinbase is back to the drawing board.
Shortly after the cancellation of Coinbase Lend came to light, an individual at a cryptocurrency event hosted by Messari founder Ryan Selkis was reportedly served a subpoena before going on stage.
Rumors are still circulating as to the recipient, but the move — coming in concert with the Coinbase Wells Notice — suggests the SEC is taking a page out of Silicon Valley’s playbook by “moving fast and breaking things.”
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