By Shelly Melancon (Switzerland)
Coinbase, almost a week ago, disclosed that they would be making it easy for users to earn returns on their crypto holdings. The idea is very similar to Coinbase Lend, which got shot down by threats from the United States SEC. The new feature will notably not cater to their customers in the United States.
Breakdown Of The New Feature
In a post on its blog, the company discussed the new feature. Coinbase revealed that the feature would allow qualified users to get a chance to receive excellent returns on their DAI (A stable coin). Coinbase added that the new feature would facilitate better access to DeFi platforms.
Coinbase recognized that DeFi was becoming one of the most celebrated spaces in blockchain technology. However, the number one exchange in America points out that these DeFi platforms can be expensive to access and difficult to use. These are the issues that Coinbase tries to address in its implementation. The company claims that users of the exchange will have access to DeFi platforms within the app in simple steps and without the fees.
The exchanges say that their users will earn returns on Dai, a stablecoin. The fund is deposited with Compound Finance protocol when users sign up for the DeFi yield program. Coinbase, in their blog, revealed that Compound decides the returns earned on Dai deposit it changes with market conditions.
According to the blog post, the high leveraging ability also speaks to the high risks involved in the market. Coinbase admits that users may experience losses. The exchange encourages users to get as much information as possible before investing in DeFi yield. In an exciting turn, Coinbase reveals that the users can access their deposited Dai at all times for other transactional purposes.
Why Exclude U.S Markets?
The new feature is in many countries except the United States. The reason for this exception is most likely a bid to avoid regulatory troubles. The company had come up with a product similar to the DeFi yield, but with the product, Coinbase could guarantee user capital protection; the product was called Lend.
The exchange had to announce that it would halt plans to launch Lend. The company also had to close down the waitlist to try out the feature. Coinbase’s decision came after the SEC. threatened them with lawsuits if they didn’t drop the products. The exchange had stated that it would push back the product’s rollout before they finally canceled it.
The exchange proposed giving users a 4% return on their deposit when they loan them to trusted firms. The proposed token to drive this system was the U.S.D.C. stablecoin. Coinbase has made sure all associated links to the feature lead back to their homepage.
The SEC argued that the product would involve securities and face the same regulations investment products face. They posted a Twitter video that showed the similarities between the proposed product and bearer bonds. Coinbase says the SEC failed to give clarity on why this should be the case or how the company can remedy it. The exchange says it awaits a clear regulatory framework in the United States.
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