SEC (Securities and Exchange Commission) threatens to sue Coinbase over lending program


The U.S. Securities and Exchange Commission has threatened the largest cryptocurrency exchange in the United States, Coinbase, with a lawsuit.  The lawsuit would end up in court over the launch of a program that would allow users to earn interest by borrowing their own digital assets.

Cryptocurrency lending programs

Programs that allow owners of cryptocurrencies to lend them out in exchange for interest are becoming increasingly popular around the world. However, some regulators, particularly in the United States, have begun to raise concerns, arguing that such products should comply with existing securities laws.

It was these concerns that led to the SEC’s threat to Coinbase. The chief U.S. regulator last week (week 1 of September 2021) told Coinbase that it intends to legally charge the company if it markets a Lend product. Paul Grewal, Coinbase’s lead attorney, addressed this in a statement on Tuesday, September 7, 2021, noting that the company intends to delay the launch of that very product. It will not be released until at least October. An SEC spokesperson declined to comment on the matter.

Coinbase CEO speaks out

In a lengthy 21-part Twitter thread, Coinbase CEO Brian Armstrong criticized the SEC’s handling of the company’s plans to launch a lending product. Armstrong also reported that the SEC denied him a meeting. Both the CEO and lead attorney said Coinbase is challenging the SEC’s determination because a “loan” is not an investment contract. 

Armstrong’s comments provide insight into the growing tension between the crypto industry and regulators, who have tightened their grip on a world that until now has existed in a regulatory “gray area,” at least in some countries.

Here’s what Coinbase’s CEO posted on Twitter’:

 “If we end up in court, we may eventually get the comment the SEC refuses. But regulation through litigation should be a last resort for the SEC, not a first resort.”

The future of the cryptocurrency industry

Recent events and the votes that have been taken on cryptocurrencies show that the industry is slowly starting to come out of the regulatory “gray area”. It looks like the Biden administration is going to regulate cryptocurrencies in the US. Time will tell if other countries will follow the same path.

Disclaimer: Blockbulletin does not take accountability of investments based on the information of the website. We highly advice readers to make extensive research prior to any invest

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