Looks like the troubles with Coinbase aren’t over yet. After a multitude of complaints regarding the exchange, The United States Securities & Exchange Commission (SEC) has threatened to sue Coinbase. This is on the basis of a crypto yield program the commission considers as security.
Regarding this, Coinbase CEO Brian Armstrong tweeted:
He further explained that the crypto exchange approached SEC over its new lending program. The program intends to offer 4% annual yield returns on deposits of USDC stablecoin.
He explained all the interactions & conversations between his firm and the SEC in a 21-tweet post. According to him, SEC responded that the lending program is security without any explanation. Moreover, if the service arrives in the market, the commission will sue the exchange.
Brian queried as to why the commission considers the program as security:
“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.”
Brian also mentioned briefly that there are other crypto firms offering similar lending services to their customers. In fact, competitors like BlockFi and Celsius do offer crypto yield products. Moreover, BlockFi is facing investigations in a number of states for its high-interest products.
Coinbase exchange is not pleased with its interactions with the SEC.
In a blog post published today, chief legal officer, Paul Grewal expressed his dismay:
“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. And although Lend customers will earn interest from their participation in the program, we have an obligation to pay this interest regardless of Coinbase’s broader business activities.”
He further said that the only clarification the firm has given is that the lending program is currently being assessed under the Howey Test:
“They have only told us that they are assessing our Lend product through the prism of decades-old Supreme Court cases called Howey and Reves. The SEC won’t share the assessment itself, only the fact that they have done it.”
On the other hand, SEC boss Gary Gensler has publicly urged crypto firms to work with the commission. This is so that they can operate under public frameworks, ensuring their survival.