Coinbase says the SEC threatened to sue it over an interest payment plan.

Coinbase, the largest cryptocurrency exchange in the United States, said on Wednesday that federal securities regulators were threatenin...


Coinbase, the largest cryptocurrency exchange in the United States, said on Wednesday that federal securities regulators were threatening to sue it over a proposed financial product that would allow customers to earn interest on asset deposits. digital.

The company, in a regulatory filing, said the Securities and Exchange Commission notified it on September 1 that its lending product could violate securities laws. Regulators, the company said, could respond to Lend’s release by seeking a civil injunction.

The question raised by Lend – an interest-generating service that somewhat resembles the accounts traditionally offered by banks – is whether it will engage in trading or offering products to consumers that are viewed as values. securities, which the SEC has the power to regulate.

The warning to Coinbase, which was publicly traded in April, says the SEC is closely monitoring cryptocurrency companies – especially as they enter the territory of heavily regulated industries, like the bank. Gary Gensler, the chairman of the SEC, said he was concerned about the effects that unregulated crypto exchanges and products could have on markets and investors.

The loan, announced by Coinbase in June, would allow customers to earn interest on cryptocurrency deposits. Specifically, customers could earn interest on USD Coin, a so-called stable currency whose value is tied to the dollar. Yields would be higher than those offered on regular bank accounts, and Coinbase is said to be one of the many cryptocurrency firms entering the industry.

Coinbase executives rebuffed the SEC in online posts, saying the loan program was no security and the commission’s opinion caught them off guard.

“The SEC has repeatedly asked our industry to ‘talk to us, come in’. We did it here, ”said Paul Grewal, Legal Director of Coinbase, said in a blog post. “But today all we know is that we can either keep the loan out of the market indefinitely without knowing why or we can be sued.”

Coinbase CEO Brian Armstrong called the SEC “sketchy” in a long thread on Twitter and said he traveled to Washington in May to meet with financial regulators from many agencies. “The SEC was the only regulator who refused to meet with me,” he said.

In seeking permission to act, Armstrong said, Coinbase faces more resistance from regulators than other cryptocurrency companies that have introduced similar products.

Securities lawyers were divided over the SEC’s tactics to go after Coinbase. Daniel Hawke, lawyer at Arnold & Porter and former head of the SEC’s market abuse division, said the agency’s attempt to stop a product launch “appears aggressive.”

But some legal experts have said securities regulators appear to be taking a somewhat cautious approach by giving Coinbase a fair warning of its reflections instead of just letting the company go ahead with the loan product and then go ahead with it. continue later.

Tyler Gellasch, a former SEC official who heads the nonprofit Healthy Markets, said the commission recognizes the importance of carefully handling a new type of product entering the market.

“He’s a very big player in the cryptocurrency arena, and they’re extremely careful when dropping a hammer,” he said.

Coinbase isn’t the only company having issues with securities regulators over crypto-based interest-generating services. Officials in five states have targeted BlockFi, a cryptocurrency firm that offers high returns on holdings. Zac Prince, chief executive of BlockFi, said the company is complying with the law but regulators do not fully understand its offerings.

“Ultimately, we see this as an opportunity for BlockFi to help define the regulatory environment for our ecosystem,” he wrote in a note to customers.

Coinbase shares fell just over 3% at the close of trading on Wednesday.



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Newsrust - US Top News: Coinbase says the SEC threatened to sue it over an interest payment plan.
Coinbase says the SEC threatened to sue it over an interest payment plan.
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