You can lend Coinbase Global (COIN 4.41%) a hand, but you can't hand it to Coinbase Lend. The leading crypto exchange is suspending its Coinbase Lend program before the high-yielding investing option had a chance to launch.

Coinbase Lend turned heads when it was unveiled by the fast-growing exchange three months ago. Traders on the platform holding USD Coin (USDC 0.01%) -- a Coinbase-issued stablecoin that can always be swapped 1-to-1 for U.S. dollars -- would've earned 4% in annual interest if they let Coinbase borrow it to lend out. There are smaller platforms offering heartier payout rates for lending and staking cryptocurrencies, but in this particular case Coinbase was willing to guarantee the principal. 

It could've been a game-changing moment for cryptocurrency exchanges in general and Coinbase in particular, but it wasn't to be. It's back to the drawing board for Coinbase. 

Someone putting in a coin with the Bitcoin logo into a piggy bank.

Image source: Getty Images.

All's well that ends Wells

Coinbase was on track to launch a compelling investment vehicle that would've brought more conservative income investors to its virtual door. The Securities and Exchange Commission had other plans, sending a Wells notice to Coinbase two weeks ago to delay if not outright block its launch of Coinbase Lend.

CEO Brian Armstrong erupted with a 21-post tweetstorm in response to the regulatory backlash to Coinbase Lend. It seemed as if he was hunkering down for a hard fight. 

He wound up buckling to the SEC pressure by the end of last week. It's a bigger deal than you probably think. As great as Coinbase is doing right now -- revenue soared 11-fold in its latest quarter on explosive profitability -- it needed this.

There are a few fires raging at Coinbase. It's been battling reports about hackers draining Coinbase accounts, bringing up safety and customer service concerns. Competitors are also getting hungrier, and that could pressure the chunky margins behind the beefy trading fees at Coinbase's namesake exchange. 

There's also a fellow digital giant that could be ready to step up its crypto game. Bloomberg is reporting this week that Robinhood Markets (HOOD 2.07%) is testing features for crypto wallets and the ability to transfer cryptocurrencies, options that are surprisingly lacking. If Robinhood is about to graduate from being a crypto exchange on training wheels it could leave tread marks on Coinbase. 

Coinbase Lend wouldn't have made all of these problems go away, but it would've made things better. Coinbase already has 68 million verified users, and the lure of a risk-light path to generating 4% interest on essentially idle cash would been a huge retention tool. Coinbase Lend would've sent shockwaves through banks and even stock brokerages, forcing them to come up with a comparable high-yielding product. 

Coinbase is already the king of the hill of cryptocurrency stocks, but Coinbase Lend could've put it on the throne of a much larger mountain. It's time start thinking again. It's time to start climbing again.