Nasdaq-listed cryptocurrency exchange Coinbase has officially dropped its plan to launch the Lend lending program after the U.S. Securities and Exchange Commission (SEC) threatened legal action. In a statement, the exchange said: “Our goal is to create great products for our customers and to advance our mission to increase economic freedom in the world. We’ve made the difficult decision not to launch the USDC APY program.”
The Rise and Fall of Lend
Coinbase first unveiled Lend in June 2021, allowing users to earn interest on USD Coin (USDC) at a rate of 4% APY, more than 50 times the national average for traditional savings accounts. The program promised principal guarantees and attracted hundreds of thousands of sign-ups. However, in early September, Coinbase revealed it had received a Wells Notice from the SEC, indicating the agency intended to sue over Lend. The SEC argued that the program involved the sale of unregistered securities, but did not provide detailed reasoning. Coinbase initially contested the notice but eventually decided to scrap the project entirely.
Regulatory Crackdown Intensifies
The SEC’s stance on crypto lending products has hardened under Chairman Gary Gensler, who has repeatedly stated that many crypto assets and DeFi products may fall under securities laws. Coinbase’s retreat is seen as a major victory for the regulator, coming after similar actions against other platforms like BlockFi. Coinbase added: “We have discontinued the waitlist for this program. We will not stop looking for ways to bring innovative, trusted programs and products to our customers.”
Diversifying Beyond Lending
Despite the setback, Coinbase is expanding in other areas. Last week, it filed an application with the National Futures Association (NFA) to offer futures and derivatives trading. The company is also raising $2 billion through a bond sale and has launched Coinbase Prime, a comprehensive platform for institutional investors with upgraded capabilities. These moves signal a strategic pivot toward institutional services and away from retail-focused lending products that attract regulatory scrutiny.
Industry observers believe the SEC’s action against Coinbase sets a precedent for the entire crypto lending market. Going forward, any similar products will likely require explicit SEC registration or exemptions. For ordinary investors, the legal uncertainty surrounding high-yield crypto lending remains a significant red flag.