The SEC hasn’t been kind to the cryptocurrency industry. This time, the watchdogs have targetted Coinbase. According to the new blog post, the United States Securities and Exchange Commission has warned that it will sue the digital asset exchange if it rolls out a new lending product. As a result, Coinbase would postpone the launch of its ‘Lend’ product until at least October.
Paul Grewal, who happens to be the Chief Legal Officer, maintains that Coinbase has been engaging proactively with the SEC about Lend for nearly six months. The exec also added that the trading platform has been eager to hear their perspective as they lookout for innovative ways for its customers to obtain more financial empowerment on Coinbase.
“Specifically for Lend, we’re seeking to allow eligible customers to earn interest on select assets on Coinbase, starting with 4% APY on USD Coin (USDC). We could have simply launched the product but we chose not to. This is far from the norm in our industry. Other crypto companies have had lending products on the market for years, and new lending products continue to launch as recently as last month.”
Coinbase detailed that its new Lend program cannot be categorized as a security or an investment contract or a note. Here, the users will not be “investing” in the program, but instead “lending the stablecoin USDC they hold on Coinbase’s platform in connection with their existing relationship.”
The blog penned down by Grewal also noted,
“And although Lend customers will earn interest from their participation in the program, we have an obligation to pay this interest regardless of Coinbase’s broader business activities. What’s more, participating customers’ principal is secure and we’re obligated to repay their USDC on request.”
Coinbase CEO says SEC’s behaviour is sketchy
Brian Armstrong, the CEO of the Nasdaq listed exchange revealed reaching out to SEC before launching Lend. However, the authority responded by telling them that the lend feature is security. When asked to share their view, Armstrong accused the SEC of refusing to clarify instead subpoena records from them and went on to demand testimony from the company’s employees.
The exec also urged the SEC to publish guidance in order to provide more clarity and enforce it evenly across the industry. However, the watchdog resorting to “refusing to offer any opinion” and “and instead are engaging in intimidation tactics behind closed door” has irked Armstrong who also added,
“Whatever their theory is here, it feels like a reach/land grab vs other regulators. Shutting these down would arguably be harming consumers more than protecting them, and by preventing Coinbase from launching the same thing that other companies already have live, they’re creating an unfair market.”