Coinbase suspends the launch of its new crypto lending business and signs new partnership with ICE
After reportedly receiving pressure from US regulators, Coinbase has put its plans to launch a crypto lending program on hold.
- Coinbase put its plan to launch a crypto lending program on hold.
- The SEC sent Coinbase official notice that it intends to sue
- Even though the SEC is preparing to bring charges against Coinbase, the company is still signing new partnerships with federal agencies.
Coinbase announced on Friday that it was withdrawing the program, which would have allowed eligible consumers to earn interest on select assets beginning with a 4% annual percentage yield, or APY, on USD Coin (USDC). The waitlist for this program has been discontinued as well.
After encouraging people to pre-enroll for its program, the company has now ended its waitlist, which attracted hundreds of thousands of American customers.
“We had hundreds of thousands of customers from across the country sign up and we want to thank you all for your interest,” the Sept. 17 Coinbase blog states. “We will not stop looking for ways to bring innovative, trusted programs and products to our customers.”
A spokesperson for Coinbase declined to comment further.
In a June blog post, Coinbase outlined the initiative. The company said in June that the national average for a regular savings account hovers around 0.07%, while high-yield accounts fall short of even 1%. By lending to Coinbase USDC, a stablecoin that can always be redeemed one-to-one for $1, users may earn eight times the national average of high-yield savings accounts, according to the blog.
The SEC sent Coinbase a Wells notice, which is the official method that a regulator uses to notify a business that it intends to sue, according to Paul Grewal, Coinbase’s senior legal officer. He wrote in a Sept. 7 blog post. The SEC believes Lend to involve securities, however, they wouldn’t go into specifics about why or how they reached that conclusion.
The SEC would not disclose anything about Coinbase’s previous intentions to launch the lending service or its current intentions to terminate it.
“We could have simply launched the product but we chose not to,” Grewal wrote at the time. “This is far from the norm in our industry. Other crypto companies have had lending products on the market for years, and new lending products continue to launch as recently as last month.”
Despite Coinbase’s numerous attempts to comply and communicate with the SEC, CEO Brian Armstrong tweeted on September 7th about the agency’s difficulties and lack of clarity on regulatory requirements. This was after the SEC threatened to sue Coinbase over its lending program, which Armstrong found ethically wrong but nevertheless agreed to comply with..
There are multiple crypto platforms offering lending services to U.S. customers, including Salt Lending Holdings and BlockFi Lending Corp, which would have competed against Coinbase’s lending program.
The SEC has a history of pushing back on cryptocurrency companies looking to offer certain financial products without being registered with the regulator. None of these companies mentioned or operating in the crypto space are clear of the target yet.
The states of New Jersey, Alabama, and Texas announced an investigation into BlockFi, a fintech company that allegedly offered unregistered securities to clients through its high-yield interest account service. BlockFi has argued that the product is not a security.
Despite reports that the Security and Exchange Commission is preparing to bring charges against Coinbase, the company is continuing to ink new partnerships with federal agencies.
In August, the Immigration and Customs Enforcement Agency (ICE) in the United States signed a new contract with Coinbase to develop software. This is Coinbase’s second partnership since then. Coinbase has announced the launch of a new agreement with US Homeland Security, as part of its intention to establish an application development SaaS for the country’s regulators.
On September 16, the US Customs Enforcement Agency and Coinbase entered into a contract. Coinbase will receive $455,000 from the agency as a result of this agreement. However, the agreement may be extended for three years. As a result, Coinbase is anticipating receiving around $1.36 million.
The agreement between Coinbase and ICE prompted Jesse Powell, Kraken CEO, to respond. He tweeted that the acquisition of Neutrino and the government’s involvement are very shocking.