The SEC is threatening to sue Coinbase over a crypto-return program it sees as collateral

The United States Securities and Exchange Commission (SEC) has reportedly threatened to sue Coinbase over a crypto-yield program it sees as collateral.

Coinbase CEO Brian Armstrong tweeted on Sept. 8 that it had been "really sketchy behavior by the SEC lately" before embarking on a 21-post thread detailing the SEC's dealings with the company have been described.

Armstrong stated that the crypto exchange reached out to the SEC earlier this year to inform the enforcement agency about the emerging Coinbase Lend program, which is said to offer a 4% annual return on USDC stablecoin deposits.

According to Coinbase's CEO, the SEC responded by telling the company that the loan program was a security with no explanation and threatened legal action if the service started:

“They refuse to tell us why they think it is a security and instead require a series of records from us (we comply), require a statement from our staff (we comply) and then tell us they will sue us if we continue, with no explanation as to why. "

Armstrong pointed out that there are other crypto firms in the market that are currently offering similar lending services to their customers and called on the SEC to provide regulatory clarity on the matter. The SEC's actions, if Armstrong reported them correctly, appear to be bad news for competitors BlockFi and Celsius, which already offer crypto-yield products. BlockFi is facing investigations into its high yield products in a number of states.

7 / Look .... we have a duty to obey the law. Sometimes the law is unclear. So if the SEC wants to publish guidelines, we'll be happy to follow suit (it's nice if you enforce it consistently across the industry, by the way).

- Brian Armstrong (@brian_armstrong) September 8, 2021

In a blog post published today, Paul Grewal, Coinbase's chief legal officer, expressed dismay at the SEC’s actions when he questioned claims that the loan function could be viewed as an "investment contract or note."

“Customers will not 'invest' in the program, but will lend out the USDC they hold on Coinbase's platform in connection with their existing relationship. And while Lend customers receive interest from their participation in the program, we are required to pay that interest independently of Coinbase's broader business operations, ”he said.

1 / The SEC does not protect investors, nor does it use intimidation tactics to promote fair, efficient and secure domestic crypto markets.

Your approach has been so bad that it is indistinguishable from an active effort to * hurt * US retail investors, which is becoming more and more likely. https://t.co/nqFZKB9G1m

- Ryan Selkis (@twobitidiot) September 8, 2021

Grewal went on to state that the company's only clarification is that the loan program is currently being assessed under the Howey Test:

“They just told us they were judging our Lend product through the prism of the decade-long Supreme Court cases called Howey and Reves. The SEC will not share the assessment itself, only the fact that it did. "

What the hell https://t.co/JuzFIcMpo8

- Erik Voorhees (@ErikVoorhees) September 8, 2021

SEC boss Gary Gensler has regularly asked crypto companies to work with the SEC so that they can operate in a public framework and ensure their survival. Grewal said the SEC's actions appear to contradict Gensler's statements:

“The SEC has repeatedly asked our industry to 'speak to us, come in'. We did that here. But today we only know that we can either keep Lend out of the market indefinitely without knowing why, or we can be sued. "

“A healthy regulatory relationship should never leave the industry in this dilemma without explanation. Dialogue is at the heart of good regulation, ”he said.

Related: SEC allegedly investigates the decentralized exchange Uniswap

Grewal said the company will postpone launching the loan program until at least October while they await further feedback from the SEC.

Unclear what impact the SEC news will have in the near future, this was not widely known and, along with the dump, this surprised many.

General discomfort, I wasn't feeling well.

I let the big boys take care of the market and now I just watch.

- The Crypto Dog (@TheCryptoDog) September 8, 2021

https://dailyaffiliatemarketingnews.com/the-sec-is-threatening-to-sue-coinbase-over-a-crypto-return-program-it-sees-as-collateral/