The SEC to sue Coinbase over proposed lending product
The US Securities and Exchange Commission has notified Coinbase, the country’s most popular crypto exchange, of its intention to sue.
The SEC has served Coinbase with a Wells notice, an official document alerting a company to the start of court proceedings, over its plans to launch the Lend programme. Lend is marketed as a high interest savings account which allows customers to earn yields on USDC, a stable coin linked to the price of the dollar, by lending capital to borrowers.
Coinbase said the company has “no idea” why the SEC intends to launch proceedings and claimed it has constructively engaged with the regulator over the proposed Lend product for the past six months.
“Despite Coinbase keeping Lend off the market and providing detailed information, the SEC still won’t explain why they see a problem,” Paul Grewal, Chief Legal Officer of Coinbase wrote in a blog post.
“Rather they have now told us that if we launch Lend they intend to sue. Yet again, we asked if the SEC would share their reasoning with us, and yet again they refused,” he added.
The SEC are reportedly assessing the product through the lens of two Supreme Court Cases: Howey from 1946 and Reves from 1990. While Coinbase has been offered an opportunity to provide a written defence of Lend Grewal said the exercise would be “futile” given the company does not know the reasons for the SEC’s concerns.
U.S. Securities and Exchange Commission Chair Gary Gensler has raised the alarm about crypto products repeatedly since taking on the role in April 2021. Last month, Gensler wrote to Senator Elizabeth Warren requesting additional resources for regulators to protect crypto investors.
Coinbase has said it will be unable to launch Lend until at least October despite a considerable waitlist.
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