Crypto: Coinbase ditches crypto lending program after receiving SEC lawsuit threat

Coinbase Global

dropped its plan to launch a program that would have allowed users to earn interest by depositing cryptocurrency, after the Nasdaq-listed crypto exchange said earlier it received a lawsuit threat from the Securities and Exchange Commission.

“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 program,” Coinbase wrote in a Friday blog post

“We have also discontinued the wait list for this program as we turn our work to what comes next,” the company wrote. 

The Lend program was designed to let customers earn interest of around 4% APY by lending their holdings of Circle’s stablecoin USDC, a cryptocurrency pegged 1:1 to U.S. dollars, to Coinbase, who would then lend the funds to other institutions. 

Such a program, according to the SEC, should be considered a security. 

Earlier this month, Coinbase’s chief executive Brian Armstrong expressed discontent over SEC’s actions in a series of tweets, saying that the regulator didn’t make clear what should and should not be considered as securities. 

Several crypto companies have been offering products that allow users to earn interest by storing their cryptocurrency, while leaders at these companies hold different views on whether such products should be considered as securities.

On Friday, regulators in three states including Texas, New Jersey and Alabama, took action against crypto lending platform Celsius, accusing the company of offering unregistered securities.

“We are disappointed these actions have been filed and wholeheartedly disagree with the allegations being made that Celsius has not complied with the law,” a Celsius spokesperson told MarketWatch in an email. 

“Given our commitment to regulatory adherence, we look forward to addressing this matter quickly. As of now, there are no changes in our services to any of our clients,” the spokesperson wrote.

Another crypto lender BlockFi, has been accused by regulators at five states of violating securities laws because of its BlockFi Interest Account, which allows users to earn yields by depositing cryptocurrencies that range from bitcoin

to ether

to stablecoins.

The SEC didn’t immediately respond to phone calls and emails seeking comment. 

The cryptocurrency market tumbled Monday partly due to contagion fear from troubled China property developer Evergrande

and uncertainty regarding crypto regulations. Bitcoin recorded a 7.6% loss over the past 24 hours, recently trading at $44,059. Ether is recently trading at $3119, down 7.5% over the past 24 hours.

See: Evergrande fears send stock market tumbling: What investors need to know about China’s teetering property giant

This post was originally published on Market Watch

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