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.
Michael Nagle | 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.
The newly public cryptocurrency services firm said in an update on its blog Friday that it will not launch Coinbase Lend, which would allow users to earn a 4% annual percentage yield on the stablecoin USDC by allowing Coinbase to lend those funds to verified borrowers. Coinbase has also discontinued its waitlist for the product.
Coinbase shares fell more than 5% 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. The price of bitcoin fell as much as 10% Monday.
“We had hundreds of thousands of customers from across the country sign up and we want to thank you all for your interest,” the post said. “We will not stop looking for ways to bring innovative, trusted programs and products to our customers.”
A Coinbase spokesperson declined to comment beyond the content of the blog post. The SEC did not immediately respond to a request for comment.
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. He also revealed that the company had received a Wells notice from the SEC over the interest product, threatening to sue Coinbase if it decided to push through with the launch.
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.
Some investors have likened Coinbase’s proposed product to a simple bond, which would then make it subject to SEC oversight.
Investor uncertainty about the regulation of stablecoins has intensified in recent weeks. 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.
Stablecoins are digital currencies designed to be less volatile than other cryptocurrencies by pegging their market value to an outside asset like the U.S. dollar. They’ve become more and more popular this year for generating yield in increasingly popular and complex decentralized finance, or DeFi, activities.
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.
