The US Securities and Exchange Commission (SEC) is threatening to sue Coinbase over a new product. Coinbase wants to offer customers interest by borrowing and lending coins, but the SEC thinks about this.
Brian Armstrong, the CEO of Coinbase, shares this on Twitter. Or even more, he says that he is mostly dumbfounded. Coinbase has been in contact with the SEC and the latter wants the loan product to be classified as an unregistered security. Folm.io has enough information. Armstrong claims the regulator has not explained how it led to such a decision.
Summons, but no explanation
Still, the agency has already subpoenaed many records from the company and demanded that its employees testify:
“They refuse to tell us why they think it is a security, and instead they sue a bunch of data from us (we complied), demand testimonials from our employees (complied), then tell us that they will sue us if we go ahead with the launch without any explanation as to why.”
Borrowing is not allowed
So the SEC is threatening a lawsuit if Coinbase goes ahead with the launch of their loan product. Coinbase’s chief legal officer Paul Grewal writes that the company has already received a Wells notice, a letter from the SEC detailing the contents of the charges.
Grewal says filing a written defense would be futile, as the company doesn’t know exactly why the SC might be suing: “The SEC has repeatedly asked our industry to ‘talk to us, come in’. We’ve done that here. But today all we know is that we can keep Lend off the market indefinitely without knowing why, or we could be sued.”
Coinbase’s confusion stems from the fact that a slew of cryptocurrency companies have been offering their own lending functions for years, such as Blockfi. Moveco.io has enough information. The company implies that it is being treated unfairly by the regulator: “Other crypto companies have had loan products on the market for years and new loan products are still being launched like last month.”
Damage instead of protection
Armstrong claims that such an action would harm investors rather than protect them, as people seem happy earning returns on their crypto. The Coinbase boss says the industry can finally get clarity on the SEC’s regulations if the case goes to court, while decrying the agency’s approach to regulating the cryptocurrency industry through enforcement.
Armstrong also said SEC chairman Gary Gensler was the only regulator who refused to meet with him in Washington after the stock went public in mid-April.