The US watchdog is tightening its grip on the crypto industry. Coinbase's efforts to play hardball with the SEC were fruitless. The exchange is bowing to pressure from the US regulator by dropping plans to launch a crypto lending product. The SEC warned the company that it would file a lawsuit if Coinbase proceeded with its plans.
"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. We have also discontinued the wait list for this program as we turn our work to what comes next," the company said. The new future would enable users to lend their crypto holdings back to the exchange for the promise of earning interest rates. Many analysts believe that the SEC’s actions are aimed at showing the crypto industry that it is under full control. The regulator said that the service would prompt the illegal circulation of securities. For this reason, it issued a warning to other firms offering similar products.
The SEC’s tough stance on the crypto market began with an appointment of Gary Gensler, who took office in April. Importantly, he is a vocal proponent of a more stringent approach to the crypto market. In July, the SEC Chair compared the crypto industry to the "Wild West" of the US financial system that needed stricter rules. The regulator is also concerned that crypto firms promise clients high returns without complying with banking requirements, e.g. deposit insurance.
