subpoena a bunch of records from us,” said Brian Armstrong after he
revealed that the SEC threatened to sue Coinbase.
The United States Securities and Exchange Commission (SEC) has
reportedly threatened to sue Coinbase over a crypto yield program it
deems as a security.
Coinbase CEO Brian Armstrong tweeted on Sept.
8 that has been some “really sketchy behavior coming out of the SEC
recently” before launching into a 21 post thread detailing the SEC’s
dealings with the firm.
Armstrong explained that the crypto
exchange approached the SEC earlier this year to brief the enforcement
body over the up-and-coming Coinbase Lend program that intends to offer
4% annual yield returns on deposits of the USDC stablecoin.
According
to the Coinbase CEO, the SEC responded by telling the firm that the
lending program is a security without any explanation, and threatened to
sue if the service was launched:
“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 pointed out
that there are other crypto firms on the market who currently provide
similar lending services to their customers, and called for the SEC to
provide regulatory clarity on the topic. The SEC’s actions, if Armstrong
has reported them accurately, appear to be bad news for competitors
BlockFi and Celsius which already offer crypto yield products. BlockFi
is facing investigations in a number of states over its high-interest
products.
In a blog post published
today, Paul Grewal the Chief Legal Officer at Coinbase expressed his
dismay at the SEC’s actions as he questioned the assertion the lending
feature can be deemed as an “investment contract or a note.”
“Customers
won’t be ‘investing’ in the program, but rather lending the USDC they
hold on Coinbase’s platform in connection with their existing
relationship. And although Lend customers will earn interest from their
participation in the program, we have an obligation to pay this interest
regardless of Coinbase’s broader business activities,” he said.
Grewal went on to explain that the only clarification the firm has
been provided is that the lending program is currently being assessed
under the Howey Test:
“They have only told us that they
are assessing our Lend product through the prism of decades-old Supreme
Court cases called Howey and Reves. The SEC won’t share the assessment
itself, only the fact that they have done it.”
SEC boss Gary Gensler has regularly urged crypto firms to work with the SEC so that they can operate under public frameworks and ensure their survival. Grewal said the SEC's actions appear to contradict Gensler’s statements:
“The
SEC has repeatedly asked our industry to ‘talk to us, come in.’ We did
that here. But today all we know is that we can either keep Lend off the
market indefinitely without knowing why or we can be sued.”
“A
healthy regulatory relationship should never leave the industry in that
kind of bind without explanation. Dialogue is at the heart of good
regulation,” he said.
Related: SEC reportedly investigates decentralized exchange Uniswap
Grewal
stated that the firm will be holding off the launch of the lending
program until at least October while they wait for further feedback from
the SEC.
source link: https://cointelegraph.com/news/sec-threatens-to-sue-coinbase-over-crypto-yield-program-it-considers-a-security
