SEC threatens to sue Coinbase over high-interest crypto product
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Answer SEC threatens to sue Coinbase over high-interest crypto product
The US Securities and Exchange Commission (SEC) has warned that it will sue Coinbase if it goes ahead with a plan to introduce a new lending product that would pay stablecoin holders 4% interest on their savings.
This unexpected move represents a setback for Coinbase and could cause problems for other companies offering high-yield crypto products.
announce Paul Grewal, Coinbase’s chief legal officer, reported on the SEC threat received by his company in a blog post Tuesday night.
In the post, Grewal described how the company had been in discussions with the Securities and Exchange Commission about a “lending” product for six months, but the agency suddenly warned last Wednesday that it could be sued if Coinbase went ahead.
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Coinbase has publicly announced its plans to launch a “lending” product in June.
At the time, the company touted the product as a way for cryptocurrency holders to earn much higher interest than what is offered in regular banks, and promised to offer a peace of mind guarantee as an alternative to accounts and what is traditionally available.
What we like to say is that the lending product proposal was not controversial at the time Coinbase announced it.
As the high-yield product that was described is only applicable to stable cryptocurrencies such as the digital currency “USDC”, as the process is similar to the traditional method but with a higher return.
In response to the legal threat from the SEC, Coinbase CEO Brian Armstrong criticized the agency on Twitter, making his protest that his company tried to do the right thing, but the SEC failed to be transparent about it. its own policies towards the crypto market, and instead engage in intimidation tactics behind closed doors.
1/ Some ambiguous behavior recently issued by the Securities and Exchange Commission.
Story time…– Brian Armstrong (@brian_armstrong) September 8, 2021
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Armstrong also complained that the SEC had failed to enforce its policies equally, allowing other companies that failed to obtain SEC approval in the first place to operate for months.
He also hinted that Coinbase might choose to fight the SEC in court, but described that as a last resort.
Meanwhile, the CEO of Ripple, which is embroiled in a lawsuit with the Securities and Exchange Commission, Brad Garlinghouse, tweeted a famous joke taken from the movie “Die Hard” to welcome Coinbase to the party.
– Brad Garlinghouse (@bgarlinghouse) September 8, 2021
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The legal threat from the SEC is good news for Coinbase and some crypto consumers, but it has the potential to cause an even bigger problem for BlockFi.
The company is already facing investigations from regulators in several different states, who claim that its high-interest products are illegal.
Given these developments, it is likely that the Securities and Exchange Commission (SEC) is preparing to take action against BlockFi and other products that offer such products.
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