- American crypto exchange Coinbase dropped its plans to launch its lending product.
- The decision came after the U.S Securities and Exchange Commission threated to sue the firm.
NEW DELHI (CoinChapter.com) — Coinbase became the latest victim of the regulatory stranglehold on cryptocurrencies. The crypto exchange quietly announced the decision in an update to an old blog post. Coinbase decided after the Securities and Exchange Commission threatened the firm with legal action.
The turnaround comes as a surprise given Coinbase’s top executives’ public reaction to SEC’s threats. The U.S government and its agencies are wary of cryptocurrency markets, considering it a hotbed for illicit activities, including money laundering, terror financing, etc. Government agencies are already investigating the world’s largest crypto exchange (by volume), Binance.
The SEC filed a lawsuit against Ripple Labs in 2020, alleging the fintech firm raised $1.3 billion through the sale of unregistered securities offerings. The government’s stance on the decentralized crypto market is to bring it under regulatory control.
Coinbase’s planned Lend program would have allowed users to earn 4% interest by lending their tokens. In addition, the exchange shared that “hundreds of thousands” of customers signed up for the program’s waitlist.
Our goal is to create great products for our customers and to advance our mission to increase economic freedom in the world. 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 USDC APY programCoinbase in its statement
Coinbase V/s SEC
SEC Chairman Gary Gensler believes crypto to be the wild west of the financial world. However, his stance on crypto has earned him criticism from several investors and some prominent Republicans. For example, Coinbase CEO Brian Armstrong took to Twitter to highlight the “sketchy behavior” of the SEC.
Moreover, the Coinbase top executive accused the SEC of using intimidation tactics to scare it into submission. The Twitter post garnered praise from crypto loyalists. However, some investors were concerned that riling up a regulatory body when the crypto world is looking for mainstream acceptance might not be the best move.
In contrast to Coinbase’s Sept 7’s loud and boisterous protest, the announcement conceding defeat was surprisingly low-key. The firm shared no press releases and did not contact early-bird customers.
Pulling the curtains on its Lend program is a major blow to Coinbase’s plans of diversifying its revenue stream. Meanwhile, Coinbase stock (COIN) opened 4.4% below the previous close at $245. Though it seems the decline is not the fallout of the SEC-induced action only.
Crypto markets fell as a result of FUD generated by failing Chinese real estate giant, Evergrande. As a result, Bitcoin fell to early August levels at one time before recovering. The crypto slump may have pulled Coinbase stock prices lower as well. Though Coinbase recouped some of its losses, prices are still down when compared to the previous week.
One key appeal of digital currencies is their decentralized nature, which means they are not subject to the same laws of economics that govern their physical or fiat counterparts. Unfortunately, regulatory compliance might take away the decentralized nature of the crypto market, leading it to the turmoil that plagues economies now.