Coinbase receives SEC threat just before launching USDC loans
Coinbase CEO Brian Armstrong is really upset. In a long Twitter thread of 21 messages, he recounted that the Securities and Exchange Commission (SEC), has threatened to sue the exchange over a new loan product.
The product is with a Coinbase Lend program, which was supposed to launch in a few weeks. The product is intended to pay 4% interest to stablecoin owners on their savings (almost four times the yield of a savings account in the US).
Coinbase’s intention with the product was for users to earn interest on selected digital assets. For now, the offering would only include the stablecoin USD Coin (USDC).
1/ Some really sketchy behavior coming out of the SEC recently.
— Brian Armstrong (@brian_armstrong) September 8, 2021
It begins by saying that they there is a “really sketchy behavior coming out of the SEC recently.” Inaccurate, he repeats, because “millions of cryptocurrency holders have obtained a return on their assets in recent years. It makes sense, if you want to lend your funds, you can get a return.” He adds that many companies do.
“We were planning to go live in a few weeks, so we reached out to the SEC to give them a friendly heads up and briefing. They responded by telling us this lend feature is a security. Ok – seems strange, how can lending be a security? So we ask the SEC to help us understand and share their view.”
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However, the SEC’s response was unclear, according to Armstrong:
“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 clarifies that they are committed to following the law but:
“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).”
But, he insists, the problem is that the SEC refuses to elaborate on its opinion. And continues:
“Meanwhile, plenty of other crypto companies continue to offer a lend feature, but Coinbase is somehow not allowed to.”
He highlights that closing these services would harm consumers more than protect them “and by preventing Coinbase from launching the same thing that other companies already have live, they are creating an unfair market.”