The Securities and Exchange Commission (SEC) of the United States has threatened to prosecute Coinbase, a Nasdaq-listed cryptocurrency exchange, for its loan service. “We don't know why...,” says the exchange. "The SEC provided no explanation.”
Coinbase announced on Tuesday that it received a Wells notice from the Securities and Exchange Commission (SEC) last Wednesday over its proposed Lend program. A Wells notice is the formal manner in which a regulator informs a firm that it intends to sue it in court.
The SEC has informed us it wants to sue us over Lend,” according to a blog post titled “The SEC has told us it wants to sue us over Lend.” Coinbase stated that the letter came as a surprise because it has been "proactively engaged with the SEC regarding Lend for almost six months." The Lend product will “allow qualified users to earn interest on chosen assets on Coinbase, starting with 4% APY on USD coin (USDC),” according to the firm.
The crypto exchange, which is listed on the Nasdaq, provided the following information: "The SEC told us they consider Lend to involve a security, but wouldn’t say why or how they’d reached that conclusion … We officially announced our Lend program in June and created a waitlist, but no public debut date was given. The SEC, however, has yet to provide an explanation. Instead, an official inquiry was launched. "
The SEC requested different papers from Coinbase, which the firm claimed it "willingly delivered." The regulator, however, “also requested the name and contact information of every single individual on our Lend waitlist,” which Coinbase stated it would not disclose.
“The SEC has consistently urged our industry to ‘talk to us, come in,'” according to Coinbase. That's what we did here. However, all we know for now is that we can either keep Lend off the market indefinitely without understanding why, or we can be sued... As a result of all of this, we won't be able to launch Lend until at least October.”
Early Wednesday morning, Coinbase CEO Brian Armstrong turned to Twitter to express his opinions and clarify the issue with the SEC.
He started, "Some pretty suspicious conduct coming out of the SEC recently," adding:
"The SEC's stated mission is to protect investors and promote fair markets. So, who are they trying to protect here, and what is the danger? People appear to be OK with the yield they're getting from this and other crypto goods."
“Shutting them down would arguably damage customers more than protect them, and they're creating an unfair market by prohibiting Coinbase from introducing the same product that other businesses have already launched,” he stated.
“If we wind up in court, we could finally obtain the regulatory certainty the SEC refuses to provide,” Armstrong added. However, court-ordered regulation should be the SEC's last choice, not its first.”
Mark Cuban, a Shark Tank star and owner of the NBA franchise Dallas Mavericks, shared his thoughts on the topic. “Brian, this is 'Regulation through Litigation,'” he explained to Armstrong. They are incapable of resolving this issue on their own and are frightened of making mistakes. They leave it to the attorneys to handle it. Just the types of individuals you don't want to have a say in how new technologies are developed. You must take the initiative.”
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