Coinbase CEO Brian Armstrong says the U.S. Securities and Exchange Commission (SEC) is threatening the crypto exchange with a lawsuit.
The SEC tells Coinbase it will sue if the company launches a new lending product known as Lend, according to Armstrong.
Armstrong says the SEC claims the product, which is designed to allow users to lend and borrow cryptocurrencies by using their holdings as collateral, would count as a security.
“We were planning to go live in a few weeks, so we reached out to the SEC to give them a friendly heads up and briefing.
They responded by telling us this lend feature is a security. Ok – seems strange, how can lending be a security? So we ask the SEC to help us understand and share their view. We always make an effort to work proactively with regulators, and keep an open mind.
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.”
Armstrong says Coinbase would gladly follow the law if it knew the rules.
“Look….we’re committed to following the law. Sometimes the law is unclear. So if the SEC wants to publish guidance, we are also happy to follow that.
But in this case, they are refusing to offer any opinion in writing to the industry on what should be allowed and why, and instead, are engaging in intimidation tactics behind closed doors.
We’re being threatened with legal action before a single bit of actual guidance has been given to the industry on these products.
If we end up in court, we may finally get the regulatory clarity the SEC refuses to provide. But regulation by litigation should be the last resort for the SEC, not the first.”
According to Coinbase’s chief legal officer Paul Grewal, Lend will not be launched until “at least October”.
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