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SEC Threatened to Sue Coinbase Over Lending Product, CEO Says

The securities regulator is threatening to sue Coinbase should the exchange launch its Lend product, Brian Armstrong claimed in a Twitter thread.

Sep 8, 2021 at 4:05 a.m. UTC
Updated Sep 8, 2021 at 4:32 p.m. UTC

U.S.-based cryptocurrency exchange Coinbase says the Securities and Exchange Commission (SEC) has threatened to sue over its yet-to-be-launched “Lend” program.

Coinbase said it had been in discussions with the SEC over its program for almost six months. Despite these ongoing discussions, Coinbase says the SEC issued a “Wells Notice,” according to a blog post on Tuesday.

A Wells Notice or letter is the U.S. regulator’s formal way of announcing it may bring charges against companies or employees.

Lend aims to provide eligible customers a 4% annualized percentage yield by lending out USD coin (USDC) to “verified borrowers.”

Coinbase says the SEC won’t explain its issue with the Lend program.

“Rather, they have now told us that if we launch Lend they intend to sue,” according to the exchange’s post.

In a tweet thread on Tuesday, Coinbase CEO Brian Armstrong said his company had complied with all the SEC’s requests including providing subpoenaed records and testimony from employees.

Armstrong also said the agency gave no reasons for a potential lawsuit. He called the SEC’s classification of Lend as a security “strange.”

“How can lending be a security?” Armstrong tweeted.

Coinbase declined to comment further. A spokesperson for the SEC did not immediately return a request for comment.

DISCLOSURE

The leader in news and information on cryptocurrency, digital assets and the future of money, CoinDesk is a media outlet that strives for the highest journalistic standards and abides by a strict set of editorial policies. CoinDesk is an independent operating subsidiary of Digital Currency Group, which invests in cryptocurrencies and blockchain startups.

Sebastian Sinclair is a CoinDesk news reporter based in Australia.

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