The United States Securities and Exchange Commission (SEC) has threatened to sue Coinbase over a crypto-based yield program, considered to be a securities trading.
Today Brian Armstrong, CEO of Coinbase, called the incident a “really shady attitude recently conducted by the SEC“, launching into a thread of 21 posts that details the relationship between the company and the US regulator.
Earlier this year, the exchange approached the SEC to inform it of the launch of the Coinbase Lend program, which intends to offer 4% annual returns on USDC stablecoin deposits.
According to the Coinbase CEO, the SEC replied to the company that the lending program consists of a trading of securities, threatening to sue the exchange if the service was launched:
“They asked us for a lot of documents (they have been sent), refusing to communicate because they believe it is a security; they asked for testimonies from our employees (these have also been sent). And then they tell us that they will sue us if we proceed with the launch, without any valid reason. “
Armstrong pointed out that there are other crypto companies on the market currently providing lending services, asking the SEC to provide regulatory clarity on the matter. In light of Armstrong’s assertion, the SEC’s decision could also undermine competitors BlockFi and Celsius, which already offer crypto yield products. In fact, BlockFi is currently already facing investigations in several states due to its high-yielding products.
“Look … we are committed to abiding by the law. And sometimes the law is unclear. Well, if the SEC were to publish a guide, we would also be happy to follow it (it would be fair if it actually applied it uniformly across the board). sector and alike). “
7/ Look….we’re committed to following the law. Sometimes the law is unclear. So if the SEC wants to publish guidance, we are also happy to follow that (it’s nice if you actually enforce it evenly across the industry equally btw).
— Brian Armstrong (@brian_armstrong) September 8, 2021
In a post published today, Coinbase Chief Legal Officer Paul Grewal expressed his disappointment with the SEC’s actions, categorically ruling out that the lending function could be considered a “investment contract or security“:
“Clients will not ‘invest’ in the program, but rather will lend the USDC held on the Coinbase platform. While Lend’s clients will earn interest from their participation in the program, we have an obligation to pay this interest, regardless of the broader businesses of the company. Coinbase “, he has declared.
“With its scare tactics, the SEC is not protecting investors or promoting a fair, efficient or safe domestic crypto market.
Their approach has been so disappointing that it is indistinguishable from an active effort to * hurt * US retail investors, which seems increasingly likely. “
1/ The SEC isn’t protecting investors, or promoting fair, efficient, & safe domestic crypto markets with their intimidation tactics.
Their approach has been so poor it’s indistinguishable from an active effort to *hurt* American retail investors, which looks increasingly likely. https://t.co/nqFZKB9G1m
— Ryan Selkis (@twobitidiot) September 8, 2021
Grewal went on to explain that the only clarification that has been provided to the company is that the lending program is currently being evaluated as part of the Howey test:
“They just let us know that they are evaluating our Lend product through the prism of the 10-year Supreme Court cases, called Howey and Reves. The SEC will not agree with the assessment itself, only that they performed it. “
What the fuck https://t.co/JuzFIcMpo8
— Erik Voorhees (@ErikVoorhees) September 8, 2021
SEC chief Gary Gensler has regularly urged cryptocurrency companies to partner with the SEC so that they can operate within public facilities and guarantee their business. Grewal says the SEC’s recent actions appear to contradict Gensler’s claims:
“The SEC has repeatedly asked our industry to ‘discuss with us, approach’. We did it. But to date, all we know is that we cannot launch Lend on the market without knowing the motivation and risking being sued ”.
“A healthy regulatory relationship should never leave the industry in this situation without explanation. Dialogue is at the heart of good regulation “, he has declared.
Related: The SEC appears to be investigating the decentralized exchange Uniswap
Grewal said the company will suspend the launch of the lending program until at least October, pending further feedback from the SEC.
“It is unclear what impact the SEC news will have in the immediate future. This was not in the public domain and, combined with the recent contraction, caught many off guard.
General sense of discomfort definitely doesn’t make me feel good.
I’ll let the big boys fix the market, I’ll stay and watch for now. “
Unclear what impact SEC news will have in the immediate, this wasn’t common knowledge and along with the dump this caught many off guard.
General sense of uneasiness, didn’t make me feel good.
I’m going to let the big boys settle the market, just watching now.
— The Crypto Dog (@TheCryptoDog) September 8, 2021
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