baldking chief exec Brian Armstrong has accused the US Securities and Exchange Commission (SEC) of intimidation after the watchdog threatened to sue the crypto platform over its proposed lending account.
The SEC has been investigating Lend, which Coinbase says will allow users to earn up to 4% annual interest on certain cryptocurrencies, since it was announced in June.
Unfortunately for the Delaware-headquartered exchange, the SEC says it reckons the service involves a security.
- A Wells notice is the SEC’s way of notifying entities it intends to start legal proceedings.
- The SEC issues them when finding a business in violation of securities laws after an investigation.
- In recent years, the regulator has sent Wells notices to the likes of S&P Dow Jones Indices, General Electric, and sports brand Under Armour.
The SEC sent Coinbase a Wells notice last Wednesday, according to the company in a blog post.
Armstrong says the SEC is the problem
According to Armstrong, Coinbase has operated strictly by the book, and it’s actually the SEC that needs to be more specific if it wants crypto firms to stick to the rules.
“We always make an effort to work proactively with regulators, and keep an open mind,” tweeted Armstrong.
“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 went on to say Coinbase would be “happy to be follow” guidance if the SEC wants to publish some (which it has).
“It’s nice if you actually enforce it evenly across the industry equally by the way,” he added.
The company’s chief legal officer Paul Grewal made a similar point in Coinbase’s blog:
“We shared the details of Lend with the SEC. After our initial meeting, we answered all of the SEC’s questions in writing and then again in person. But we didn’t get much of a response.”
“The SEC told us they consider Lend to involve a security, but wouldn’t say why or how they’d reached that conclusion.”
Not just Coinbase, other crypto platforms face regulators
In his 21-tweet thread, Armstrong also hinted that the SEC is targeting Coinbase unfairly. He said his exchange isn’t the only company to offer these types of products.
He said: “Plenty of other crypto companies continue to offer a lend feature, but Coinbase is somehow not allowed to.”
It’s worth noting that state regulators recently opened investigations into New Jersey-based crypto lender BlockFi over its BlockFi Interest Accounts (BIAs) for almost exactly the same reason.
Regardless of whether the SEC is acting fairly with regards to Lend, Coinbase is no doubt hoping to have any confusion cleared up as soon as possible.
Coinbase stock slipped over 2% after news of the possible SEC action broke — and it’s still down 40% since its record high set just hours after it went public in April.
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