Following lawsuit threats by the Security and Exchange Commission (SEC), Coinbase is killing its proposed loan product Coinbase Lend and its associated waitlist.
“Our goal is to create great products for our customers and to advance our mission to increase economic freedom in the world,” the company said in a blog post. “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.”
See also: SEC Threatens Coinbase With Lawsuit Over Lending Scheme
Paul Grewal, Coinbase’s chief legal officer, said in a blog post earlier this month that the company didn’t know what issues the SEC had with Coinbase Lend, and the two sides had been in discussions for over six months.
At first Coinbase vowed to fight back and got social media support in early September when Coinbase CEO Brian Armstrong made its SEC woes public on Twitter. He described the SEC’s legal threats as “sketchy behavior.”
But in an about-face, Coinbase announced it was dropping plans for the lending product. The proposed Coinbase Lend would have given users the ability to loan their USDC holdings and earn 4% interest with no risk to principal.
Read more: Coinbase CEO’s Tweet Storm Fuels Escalating Fight With SEC Over Regulation of Crypto, Stablecoins
The decision by Coinbase comes at a time when regulatory agencies are putting the cryptocurrency space under a microscope and planning frameworks for new oversight.
SEC Chairman Gary Gensler testified before the Senate Banking Committee earlier this month and said that the agency is working hard to define how cryptocurrency and tokens fall under securities and other laws.
Gensler said in prepared remarks before the hearing that the crypto sector was like “the Wild West.”
You may also enjoy: Three US States Probe BlockFi’s Crypto Accounts
The crypto loan and savings sector is under intense scrutiny by state and federal regulatory agencies. Five states have ordered BlockFi to stop offering its interest-bearing crypto products. In addition to BlockFi, New Jersey also issued a cease and desist order to Hoboken-based Celsius.