What Coinbase’s SEC Troubles Mean for Crypto Startups

Coinbase CEO Brian Armstrong’s disclosure that the Securities and Exchange Commission has threatened to sue the cryptocurrency exchange over its upcoming Lend product shows that regulators are ready to act on their concerns about the crypto industry. It  doesn’t bode well for similar crypto lending platforms such as BlockFi, and ones that operate in the decentralized finance space, like Compound and Aave. 

Armstrong tweeted Tuesday that “plenty of other crypto companies continue to offer a lend feature” without consequences from the SEC—and he’s right, though there should be an asterisk to that statement. The most notable firm with a competing product is BlockFi, which offers up to 7.5% yield on its crypto lending account (Coinbase’s Lend would offer 4%). While BlockFi hasn’t reported any action from the SEC, it has had issues, including cease and desist orders, with securities regulators in five states over its interest-bearing account.