Coinbase released a statement on Wednesday that the Securities and Exchange Commission plans to sue the crypto exchange if it releases its lending product, CEO Brian Armstrong made his feelings towards the SEC’s move complaining about the regulator’s “sketchy behavior”.
The Coinbase crypto exchange said it had contacted the SEC to give it a heads-up about its Lend product, which enables people to earn interest on their crypto holdings, before it goes live.
For six whole months, Coinbase made sure it was working and talking with the regulator to ensure the Lend program complied with the law, according to Paul Grewal, the company’s chief legal officer.
During that time, the SEC told Coinbase that its lend feature is considered to involve a security, but naturally when asked they didn’t explain how it reached that conclusion.
So of course the company was surprised last week when it received a massive penis shaped wells notice, which is a letter sent by the SEC when it plans to take enforcement action.
“The SEC has told us it wants to sue us over Lend. We don’t know why,” Grewal wrote in a blog post Wednesday.
Coinbase boss Armstrong like any good CEO took to Twitter to complain about the regulatory agency.
“Some really sketchy behavior coming out of the SEC recently,” he said in a series of tweets.
“They refuse to tell us why they think it’s a security, and instead subpoena a bunch of records from us (we comply), demand testimony from our employees (we comply), and then tell us they will be suing us if we proceed to launch, with zero explanation as to why,” Armstrong added.
“Plenty of other crypto companies continue to offer a lend feature, but Coinbase is somehow not allowed to,” he added.
In June, the company revealed to the world its plan to introduce its lending program and set up a waitlist. At launch, it will offer 4% interest on holdings of USD coin. Those funds will be lent out, and Coinbase may no longer be their custodian. Lend will now not launch publicly until at least October, Grewal said.
He said the Lend program doesn’t qualify as a security, as it doesn’t involve an investment contract or a note.
“Customers won’t be ‘investing’ in the program, but rather lending the USDC they hold on Coinbase’s platform in connection with their existing relationship,” he said.
It also asked for names and contact information of every person on Lend’s waitlist, but the company refused to comply as the data is sensitive, he said.
Personally I think the SEC is on a witch hunt. I think they see the potential crypto can offer but with that potential they see a downfall.
The real question is wether it’s their own personal (government) wallets losing money or not being top dog that’s the downfall or they actually do see a monetary risk for everyone and they just have not been so clear about it. Whatever your opinion is I think we can all agree that this intense chess game between XRP and the SEC and now Coinbase isn’t over just yet.