> Coinbase's Lend program actually would be subject to other existing regulatory regimes.

How?

> For example, the lending of SEC-regulated securities like stocks is not regulated by the SEC, it is regulated by FINRA.

Cryptocurrencies are not generally securities, though some may be. To the extent this isn’t limited to securities, it would not be regulated by FINRA.

> their expectation was that the accounts would regulated by another entity, presumably the FDIC or FINRA.

FDIC doesn’t insure, and therefore regulate, cryptocurrency accounts. I’m reasonably certain Coinbase is aware of this fact. [0]

> The whole situation smells of a turf war between regulatory agencies,

Which other regulatory agency is asserting authority?

[0] https://help.coinbase.com/en/coinbase/other-topics/legal-pol....

Your currency accounts at brokerages are regulated by FINRA. This includes your cash accounts at cryptocurrency brokerages and exchanges. Security lending, on both the lending of securities as well as the lending of cash for the purchase of securities, is also regulated by FINRA. This also extends to non-security financial instruments, such as forex and cryptocurrencies.

Neither the SEC nor FINRA has stated anything public about this at the moment, but I'm willing to bet FINRA will go to bat for this.

You seem to be confused about the relationship between FINRA and the SEC. FINRA is not the equal of the SEC, they are subordinate. FINRA is a self-regulatating, non-governmental organization to whom the SEC delegates some regulatory enforcement authority, however the SEC is the government, and the SEC is always the (first level) of appeal if you don't like what FINRA says.

If the SEC says no, FINRA can't say yes, because (to a first approximation) that's their boss.

You're right that FINRA is authorized by the SEC, but that doesn't mean that regulatory powers that FINRA has been authorized to perform can be pulled back on a whim. There is a binding charter in place, and there is plenty of history of FINRA telling the SEC to fuck off when something is clearly within their wheelhouse.

I don't know the ins and outs of the relationship between FINRA and the SEC. I am rather more familiar with the similar relationship between FERC (Federal Government) and NERC (SRO), and in that case NERC really can't say "Fuck off." NERC will occasionally try and push back via public lobbying, using its position as the organization of power producers to speak for them when they- as a collective- don't like some new rules coming out, but if the rule does come out and get finalized, they don't get to say 'no, go away' because the Federal Government gets to make the regulations.

And just from first principles, I'm not sure that FINRA, an organization largely dominated by traditional broker-dealers would be willing to go to bat for a weirdo newcomer. If they aren't doing the basics of building relationships with the SEC, is Coinbase building relationships with the other companies necessary to get FINRA to go to bat for them? But again, not sure about this, just a bit skeptical.

I think that's a really good question. Financial service companies almost unanimously would rather deal with FINRA than with the SEC because FINRA has a form of democratization of control.

Coinbase certainly started out with the rogue "Can't touch me, it's crypto" bullshittery, but over the past 6 years they have been one of two exchanges (the other being Gemini) which have actually taken regulatory approval and collaboration seriously. Maybe the SEC's fines and handslaps have made them fear the alternative, who knows. Whether that means that they can really have any influence over FINRA is yet to be seen.