Coinbase Launches New DeFi Yield Platform

Last updated: Mar 30, 2023
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Coinbase, the biggest crypto exchange in the US, will be going ahead with a new platform for earning yield on stablecoins despite threats from the U.S. Securities and Exchange (SEC) for its proposed Lend offering.

Users in 70 different countries (Not including the US) will now be able to earn yield on their DAI, a stablecoin running on Ethereum and maintained by MakerDAO.

Coinbase will use decentralized finance (DeFi) protocol Compound Finance (COMP) and its rates to generate the yield for its customers. The crypto exchange without a headquarters said that it’s aiming to make DeFi more accessible to the masses by allowing people to bypass the less than enjoyable user experience of most popular platforms.

“Decentralized Finance (DeFi) is becoming one of the most popular use cases for blockchain technology and cryptocurrencies,” Coinbase said in an announcement, adding that DeFi “enables people to access crypto applications without the need for a centralized intermediary.”

“However, accessing DeFi protocols can require expensive network fees and involve a somewhat complex user experience. Coinbase is making DeFi more customer friendly and accessible. Eligible users will now be able to access the attractive yields of DeFi from the comfort of their Coinbase account with just a few taps and without the network fees.”

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Earlier in the year, Coinbase was prevented from rolling out its Lend platform by the SEC. According to Coinbase, the SEC threatened to sue the exchange even after months of attempting to engage with the regulator to sort out any legal uncertainties behind the platform. The SEC had deemed the program to be in violation of securities laws, though Coinbase maintains it never got a clear answer as to why.

Writing in a blog post in June, Coinbase’s chief legal officer Paul Grewal said:

“The SEC told us they consider Lend to involve a security, but wouldn’t say why or how they’d reached that conclusion.”

Grewal said that the SEC forced Coinbase to go through a long process of various legal hoops, including documents and writing responses, a sworn testimony from a corporate witness, and even the names and contact information of every single person who was on the Lend waitlist, which Coinbase did not comply with.

Grewal implied the process was rather surprising given that there are already countless similar lending platforms in existence.

"The SEC has repeatedly asked our industry to 'talk to us, come in.' We did that here. But today all we know is that we can either keep Lend off the market indefinitely without knowing why or we can be sued. A healthy regulatory relationship should never leave the industry in that kind of bind without explanation. Dialogue is at the heart of good regulation."

It’s unclear if the SEC has any legal qualms about Coinbase’s new DeFi offering yet, and the regulator hasn't made an official statement on the matters.

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