SEC’s Action Saves Coinbase From Crypto Lending Crisis

• The SEC blocked Coinbase from launching its Lend product in 2021, which probably saved the exchange from a possible crisis.
• Co-founder of Three Arrows Capital, Zhu Su, believes that the SEC’s action saved Coinbase from big trouble.
• In June 2021, Coinbase announced plans to launch a program called Lend, which would enable users to earn a 4% annual percentage yield (APY).

Coinbase, one of the world’s leading digital currency exchanges, was saved from a possible crypto lending crisis by the US Securities and Exchange Commission (SEC) in 2021. This was the opinion of the Co-founder of now-bankrupt crypto hedge fund Three Arrows Capital, Zhu Su, who believes that the SEC’s refusal to allow Coinbase to launch its Lend product saved the exchange from being entangled in the ongoing market contagion.

The story began in June 2021, when Coinbase announced plans to launch a program called Lend, which would enable users in the United States, except for New York and Hawaii, to earn a 4% annual percentage yield (APY) when they lend their USDC. The program was seen as a way for Coinbase to diversify its services and expand into the lending market.

However, in September 2021, Coinbase revealed that the company had received a Wells notice from the SEC, indicating that the securities regulator was looking to sue Coinbase if the crypto exchange went ahead with launching the Lend program. This took Coinbase by surprise, as the exchange had been in talks with the regulator for nearly six months. According to a blog post by the firm’s chief legal officer, Paul Grewal, the SEC did not provide any concrete reason for its action and stated that the product launch would be on hold till October.

It was this action that Zhu Su believes saved Coinbase from a potential crisis, as the SEC’s refusal to let the company launch the Lend product prevented it from becoming entangled in the market contagion. In the current market environment, many exchanges have been struggling due to the increased volatility and lack of liquidity, and Zhu Su believes that Coinbase would have been in a similar situation had it gone ahead with the product launch.

Coinbase remains an extremely popular exchange, and its decision to pause the launch of the Lend product was certainly a wise move. The exchange’s decision to comply with the SEC’s ruling may have saved it from a potentially disastrous situation and has given it the opportunity to continue to provide its services to its users.