While not outright banning cryptocurrencies like China, the US and its regulators have become more vocal and more critical of cryptocurrencies over the last couple months. The U.S. SEC chair, Gary Gensler, has become arguably the most vocal critic of many cryptocurrencies, comparing them to the Wildcat banking era of the 19th century (what Gensler gets wrong about this analogy), labeling stablecoins “stable value coins” in an attempt to ensure SEC regulation over them, and comparing all crypto to poker chips.

Additionally, Coinbase was forced to end its planned lending product (Lend) after the SEC threatened to sue the company if it was released. Coinbase dropped its plans to launch a crypto lending product, entitled Lend, after pushback from the SEC. It was the SEC’s stance that the product constituted a security, per its original announcement blog post.

Coinbase had announced plans for Lend in June (see tweet above). However, Coinbase then revealed they were warned by the SEC that they would be sued if the launch went through without much explanation. 

The strangest aspect, apart from the SEC’s lack of clarity (which all of crypto is becoming accustomed to), is that Lend is not a novel or new product. Crypto users can utilize similar products offered by the likes of Gemini, which enables customers to lend their cryptocurrency holdings back to the exchange in return for some interest, as well as Blockfi, Celsius, Nexo, and others. Coinbase planned to launch the Lend product with the functionality for users to stake the stablecoin USDC and earn (as a starting rate) 4% APY.

With Coinbase backing off their Lend product, the next natural question is what this means for the other companies offering similar products and services as well as DeFi products offering yield.

What is arguably most curious is that the SEC chose to clamp down on Coinbase, a publicly traded company that prides itself on aligning with regulators and working within the regulatory system, rather than the endless scams and Ponzi schemes that still exist in the crypto world today. If this really is all in the name of “customer protection,” it is hard to argue Coinbase would be anyone’s starting point.

Also, stablecoins saw continued growth this quarter, with USDC supply increasing by over 4 billion and Tether supply increasing by about 7 billion. However, Circle, the company behind USDC,  received an investigative subpoena from the SEC in September. “We are cooperating fully with their investigation,” Circle stated while citing that SEC is requesting documents and information regarding certain of their holdings, customer programs, and operations.