The U.S. Securities and Exchange Commission (SEC) has threatened to sue Coinbase Global Inc (COIN.O) if the crypto exchange goes ahead with plans to launch a programme allowing users to earn interest by lending crypto assets, Coinbase said on Wednesday.
The SEC has issued Coinbase with a Wells notice, an official way it tells a company that it intends to sue the company in court, Paul Grewal, the company’s chief legal officer said in a blog post. He said Coinbase would delay the launch of its ‘Lend’ product until at least October as a result.
Chief legal officer Paul Grewal indicated in the post that the company was caught off guard by the threat considering its efforts to engage with the regulatory agency for the last six months. CEO Brian Armstrong claims in a series of tweets that when he traveled to Washington, D.C. in May, the SEC “refused” to meet with him.
That visit took place shortly after Coinbase became the first publicly traded crypto exchange and about a month after Gary Gensler had been confirmed as chairman of the SEC.
“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,” Armstrong said.
The product in question is billed as allowing users to earn a 4% annual percentage yield on a so-called stablecoin (USD Coin) by allowing Coinbase to lend those funds to verified borrowers. Coinbase backs USD Coin and guarantees that it can always be redeemed for $1. High interest accounts have become popular among crypto users, with companies like BlockFi and Gemini similarly offering a high yield on stablecoin and other cryptocurrency balances.
1/ Some really sketchy behavior coming out of the SEC recently.
— Brian Armstrong (@brian_armstrong) September 8, 2021
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