Coinbase has received a warning from the United States Securities and Exchange Commission (SEC) about its high-interest crypto product, Lend. The product is intended to pay 4% interest to stablecoin owners on their savings. However, this idea did not sit well with regulators and, according to Coinbase, “if we launch Lend, they intend to sue.”
This move could be the SEC’s first step in monitoring such products and suing the company offering them. This also means that this highly competitive space filled with numerous exchanges would have to reevaluate its products before the SEC follows them.
In response to the SEC’s warning, Coinbase legal officer Paul Grewal wrote a blog post informing the community about this threat. In it, the executive referred to discussions between the SEC and the company about Lend over the past six months.
Plans to announce the product were finalized in June. However, the SEC has been trying to prevent Coinbase from going ahead with the product.
When it was first presented to the public, Lend was proposed as a product of great interest. He promised to offer a “peace of mind” guarantee as a substitute for the FDIC insurance seen with traditional interest-bearing accounts. The product was applied to USDC stablecoin only.
The lack of clarity in the SEC’s concerns about the product offering led Coinbase CEO Brian Armstrong to comment that he may choose to fight the SEC in court as a “last resort.”
In a Twitter thread, Armstrong expressed his disappointment and anger at the SEC. According to the executive, despite trying works With the agency, the SEC was not transparent about its encryption policies. This is now attractive into “intimidation tactics behind closed doors,” he said.
The Coinbase CEO also highlighted the same points that Ripple has been making all along in its own lawsuit against the SEC.
Ripple CEO Brad Garlinghouse quickly took note of everything that was going on with Coinbase and tweeted:
– Brad Garlinghouse (@bgarlinghouse) September 8, 2021
The SEC charging major exchanges can spell trouble for the crypto space and other companies offering similar high-yielding products that could be considered securities. In fact, according to many, Coinbase may be among the first. Other companies are likely to be on the SEC’s warning list soon as well.
Legal opinions also came quickly, with attorney Preston Byrne tweeting:
“Performance” products are securities. They do not differ in any material respect from an unsecured bond. They just don’t use the name.
Other countries, like England, have rules for debt crowdfunding. The United States should check it out and we should emulate those rules here. https://t.co/8BRbu6s4nv
– Preston Byrne (@prestonjbyrne) September 8, 2021
This is a machine translation of our English version.