Right, OP is saying that on a fundamental level, there isn't a difference (between LEND and a savings account), except that Coinbase is not a federally regulated FDIC insured bank.

Metaphorically, Coinbase just went to the police department and explained in great detail their intention to sell hard liquor without a liquor license. Under sworn testimony, they explained... 'you see, we are just providing the same product as licensed liquor stores, so it's all good'.

And it worked! Reading this and reading HN comments I realize I don't want the SEC involved in this. Crypto is more & more bringing to the front of the conversation about how protection should be the default but having the ability to opt out is the choice individuals should have.

FDIC is a perfect example! There are accounts I know and would expect that but there are times I'm willing to waive that for compensation. Welcome to the land of crypto where nothing is FDIC and the government isn't going to protect anything.

Public opinion matters because it can be the very conversation that gets politicians to challenge the existing laws to be changed.

FDIC was put in place after The Great Depression, in order to prevent another Great Depression. There is no opt out because when large numbers of people make risky investments without planning for the consequences, it affects the entire economy.

Individual freedom vs. community safety.

Where to draw the line?

Who should draw it and by what mechanism?

> Where to draw the line? Who should draw it and by what mechanism?

The democratically elected government seems like a good place to start!

Not exactly. After many, many decades of frauds, schemes, panics, and crashes, harsh experience has led to a regime where nobody can do anything without a very explicit carve out. In tech terms, it's a default "deny all", with a white list of "things which are not thinly disguised ponzi schemes", not a default "allow all" with a black list of "things which have been shown to be thinly disguised ponzi schemes".

So yes, banks are one of the exemptions, because they have their own regulator (which is one way to get on the white list).

> Consulting with relevant regulators when the legislation is unclear (or non-existent) seems like the opposite of a red flag.

No, the red flag is that Coinbase (correctly!) understands that the SEC is the relevant regulator. Your local credit union does not go to the SEC when they want to offer a new type of savings account because the SEC does not regulate credit unions. Which is good, because the SEC is only competent to apply securities law, and securities law doesn't allow savings accounts.

So yes, absolutely you should consult with the relevant regulator, and if the relevant regulator for you is the Office of the Comptroller of the Currency (who regulate banks), they're probably going to cheerfully sign off on your savings account idea; they like savings accounts. But for Coinbase, it's not the relevant regulator, because they're not a bank. Nor do they seem to fall into any of the other many exceptions and regulatory schemes so...