The US Securities and Exchange Commission has threatened to sue the Nasdaq-listed cryptocurrency exchange Coinbase over its loan product. The exchange says, “We don’t know why … We have no explanation from the SEC.”
Coinbase threatened by SEC
Coinbase announced Tuesday that it received Wells notice from the SEC last Wednesday about its proposed lend program. A Wells Notice is the official way a regulator notifies a company that it intends to sue the company in court.
In a blog post titled, “The SEC told us they are about to sue us over Lend. We don’t know why, ”Coinbase said,“ it has been in proactive contact with the SEC through Lend for almost six months, ”so the announcement came as a surprise. The company described that the Lend product “enables eligible customers to earn interest on selected assets on Coinbase, starting with 4% APY on USD Coin (USDC).”
The crypto exchange listed on the Nasdaq in detail:
The SEC informed us that they considered Lend a security but didn’t want to say why or how they came to this conclusion … In June we publicly announced our Lend program and opened a waiting list, but didn’t set a public launch date. But here, too, we did not get a statement from the SEC. Instead, they opened a formal investigation.
The SEC asked Coinbase for various documents that the company “voluntarily” provided. However, the supervisory authority “also asked for the name and contact details of every single person on our waiting list for loans,” which Coinbase said it did not agree to provide.
Commenting on Coinbase, “The SEC has repeatedly asked our industry to ‘speak to us, come in.’ We did that here. But today we just know that we can either keep Lend off the market indefinitely without knowing why, or we can be sued … The result of all this is that we won’t be launching Lend until October at the earliest. “
Coinbase CEO Brian Armstrong went to Twitter early Wednesday morning to share his thoughts and clarify the situation with the SEC.
“Recently there was really patchy behavior coming from the SEC,” he began, adding:
Allegedly, the SEC’s goal is to protect investors and create fair markets. So who are you protecting here and where is the damage? People seem pretty happy to be making returns on these different products at a lot of other crypto companies.
“Shutting these down would arguably do more harm to consumers than protect them, and by preventing Coinbase from starting what other companies already have live, they are creating an unfair market,” he argued.
Armstrong continued, “If we go to court, we may finally get the regulatory clarity the SEC refuses to provide. But litigation regulation should be the SEC’s last resort, not the first. “
Shark Tank star and NBA team owner, Dallas Mavericks, Mark Cuban, commented on the matter. He told Armstrong, “Brian, this is ‘litigation regulation’. You are unable to cope with this yourself and you are afraid of making mistakes. They leave that to the lawyers. Just the people you don’t want to affect the new technologies. You have to go on the offensive. “
What do you think of the SEC’s actions against Coinbase? Let us know in the comment section below.
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