Following a public stand-off with the Securities and Exchange Commission (SEC) over its pilot APY credit program, Coinbase, America’s largest cryptocurrency exchange, is moving forward with the program despite announcing earlier in September that they would submit to the regulatory body.
The service that the plans to avail will see its customers make up to 5% ROI just for depositing and trading the Defi NFT marketplace. Compound through its proprietary mobile app.
How The Program Works
The crux of the program’s framework is to enable users to earn while they deposit and trade simultaneously. The stablecoin that will feature this utility is the DAI stablecoin pegged to the US dollar.
What Coinbase does is that it will enable users to access the Defi market space through their mobile app. The app will serve as a gateway to NFT based Compound Finance. Compound Finance is an individual NFT market space that allows users to sell, buy and HODL their NFT collectables and cryptocurrency tokens.
The DAI token deposited by users will be sent to Compound automatically by the system. The interest the exchange provides reflects the interest provided by Compound, which varies monthly. The interest fluctuated between 2.83% and 5.39% in October.
In hindsight, the service process provided is a process that the users themselves can efficiently complete. To better understand the previous statement, we can draw parallels with the following analogy: John wants to eat KFC chicken. He can easily get up from his place and take transport to a KFC outlet to purchase the chicken and eat.
But in the case of a readily accessible delivery service, John will most likely prefer to order from such delivery service and eat in the comfort of his home whilst skipping the transportation process, especially if the service is ‘virtually free’.
Coinbase’s deposit and earn program can be compared to the delivery service, delivering a service process that anyone can execute. The only difference is the whole process has been simplified into a click of a button on the mobile app. It also offers a ‘free of charge’ transaction fee, opposite from the Defi expensive transaction fees.
Coinbase did not delve deeper into the detailed framework of the program. The insurance of the deposited Dai stablecoin was not adequately defined; in the large scheme of things, such insurance doesn’t change anything.
Coinbase’s Plan And Its Initial Withdrawal
Earlier this year, the US-based exchange rolled out plans to launch a credit program that will provide credit facilities to American’s exclusively.
The exchange subsequently anchored various promotion programs and performed a very extensive rally that saw hundreds of thousands of Americans turn up and successfully pre-register for the service.
Coinbase recalled all its plans a few months later, citing regulation issues with the US Security and Exchange Commission (SEC).
However, the exchange didn’t give up on its plans, announcing later in December that it would launch the service that was supposed to be available in only the US, for over 70 international countries globally.
Coinbase Defies The SEC
In today’s development, Coinbase has decided to undermine the SEC as it plans to launch the APY credit programe in a roundabout manner, taking advantage of unclear regulations.
It is possible for the SEC to fine and regulate Coinbase if it carries on with the programe launch. However, the exchange has revealed its intention to fight the regulator in the Court of law.
Coinbase has voiced out to other crypto assets firms in the US like Ripple and Terra, urging them to make sure that when they are in similar situations, they should decide to go to Court for resolution, rather than giving in to the ‘egoistical’ SEC.