Coinbase in the SEC’s crosshairs
It was Coinbase CEO Brian Armstrong who revealed the matter in a lengthy Twitter thread. As he recalls, Coinbase had announced earlier this summer the release of a new investment option for users of the platform.
This involved creating USD Coin (USDC) savings accounts, which would allow their holders to generate 4% annual interest. This was a first initiative for Coinbase, which was planning to expand this type of service in the future… Until the US financial regulator came along.
The SEC’s accusation is now unfortunately classic: it accuses Coinbase of offering unregistered financial securities. It’s the same accusation that has already sunk major cryptocurrency projects, including Telegram’s Gram for example.
More on the Coinbase exchange platform
Why target Coinbase in particular?
But as Brian Armstrong points out, Coinbase is far from the first or only company to offer services like this. Furthermore, Coinbase’s CEO reports that he is unclear as to how a lending service can be considered a financial security by the SEC.
Coinbase reportedly tried to clarify things with the SEC, and provided the documents requested by the institutions, but the company did not receive an explanation:
6/ 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 Armstrong (@brian_armstrong) September 8, 2021
« They refuse to tell us why they think it’s a financial security. Instead, they demand records […] ask for testimony from our employees […] and then finally say they will sue us if we go for it, without any explanation. “
The Coinbase CEO argues that in addition to offering unclear guidelines, the SEC is creating an unbalanced market, where some companies can offer these types of services, while others cannot. He further explains that the SEC is the only regulator that has refused to meet with Coinbase’s teams.
A lawsuit to come?
In the industry, the SEC’s reputation is well established. The Financial watchdog has been distinguished by its great hostility to the cryptocurrency sector, and by sometimes misunderstood guidelines.
This time it is tackling a big one: Coinbase is the first crypto company in the United States to go public. Furthermore, Brian Armstrong confirms that the company will be able to take the risk of a lawsuit, if it can clear up some things:
” If we end up in court, we may finally have the clarity in terms of regulation that the SEC is currently refusing to provide. But regulation by litigation should be a last resort for the SEC., not a first. “
If a lawsuit happens, it could in any case represent a major milestone for cryptocurrency companies as a whole. Coinbase would be a trailblazer here too, and would represent the broader interests of the industry.
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About the author: Marine Debelloir
Deputy Editor-in-Chief on Cryptoast, I fell into the crypto-currency pot a few years ago. I’m passionate about the innovative technologies that come from blockchain and I love digging up the juiciest news to share with you.
All articles by Marine Debelloir.