Coinbase’s CEO revealed yesterday that the top regulator had threatened to sue the exchange platform if it continued working on its crypto lending program.
Coinbase CEO Brian Armstrong had a lot to say on Tuesday on his Twitter account in response to the SEC’s conduct regarding the exchange platform’s soon-to-be-launched yield product. While several crypto-currency players are increasingly moving towards allowing their customers to lend crypto assets in order to collect revenue, Coinbase announced earlier this year that it would be launching its own yield product called Lend.
The product would be based on the USDC, and users could earn up to 4% annual percentage yield (APY). The now publicly traded platform touted the product as one that would allow users to earn up to 50 times the average interest rate, which is 0.07%. It also revealed that the high interest rates did not pose any increased risks as customers’ savings were protected by a guarantee.
With the product set to launch in a few weeks, Coinbase notified the SEC, which Armstrong said was not very welcoming. The agency said the Lend feature was a security without offering any explanation for it.
“They refuse to tell us why they think it’s a security, and instead they subpoena a bunch of records (we comply), require testimony from our employees (we comply), and then tell us they will sue us if we proceed with the launch, with zero explanation as to why.”
Armstrong, who is also a co-founder of the crypto donation organization GiveCrypto, was obviously unimpressed with the SEC’s antics, noting that while his company had made efforts to do the right thing, the SEC had resorted to threats.
The exchange’s CEO was also wary of the SEC’s attitude toward crypto, citing an example earlier this year when SEC Chairman Gary Gensler flatly refused to meet with him.
General counsel Paul Grewal revealed that Coinbase has been in communication with the financial watchdog for six months and has also complied with the regulator’s requests. The exchange platform remained shocked by the SEC’s intention to sue without specific explanation – an action he categorized as an unhealthy regulatory relationship.
“A healthy regulatory relationship should never leave the industry in this kind of situation without explanation,” he wrote.
It remains to be seen what the SEC has planned for the crypto industry and its players. Coinbase rhe joined the list of crypto entities under the SEC’s radar, with others like BlockFi under investigation for illegal offerings.