The regulatory battle continues to heat up. Now, the US Securities and Exchange Commission (SEC) has seemingly turned a blind eye to arguably the largest crypto exchange in the United States.
The news comes after five US states sent individual communications to the DeFi platform BlockFi in recent weeks. Now, Coinbase, an exchange for cryptocurrencies such as Bitcoin or Ethereum, is reportedly facing regulatory scrutiny over its upcoming, yield-generating “lend product.”
Coinbase CEO Brian Armstrong had a lot to say about this. The CEO calls the SEC’s behavior ” bizarre.”
Coinbase expresses frustration
Coinbase has published a clearly worded blog post announcing the authority’s threats. The title: “The SEC has informed us that it intends to sue us for Lend. We don’t know why.“
The post by Coinbase’s chief legal officer, Paul Grewal, explains that the agency issued a so-called Wells notice last week about the company’s upcoming Lend product-despite what Coinbase described as “months of productive collaboration efforts.” A Wells notice is a regulatory letter announcing the preparation of enforcement actions.
The Coinbase Lend product is designed to allow consumers to earn 4% APY on the stablecoin USDC as a starting point for selected interest-bearing assets. The blog states that the company takes a proactive approach. One would first inform the SEC of intentions rather than launching the platform preemptively. The blog post goes on to say that despite these efforts and the SEC’s fulfillment of reasonable demands, the agency intends to file a lawsuit should Coinbase launch the Lend platform.
The post concludes with the statement that the Lend platform will not launch until October for the time being. It also reaffirms that “dialogue is at the heart of good regulation”. Unfortunately, it seems to be a very one-sided conversation so far.
The SEC appears to be promoting a “ask for forgiveness instead of permission” policy.
It gets even better
Coinbase CEO Brian Armstrong, expresses his frustration currently also-on Twitter. In a tweet storm of over twenty posts, Armstrong begins with”some really quirky behavior that came from the SEC recently…”.
Armstrong briefly recaps the blog post. The sticking point seems to be that the SEC describes the lending function as a security without providing any kind of elaboration or specification as to how or why that should be the case.
These circumstances could set a very interesting precedent for the latitude given to the SEC when it comes to how, what, and why the SEC determines what a security is and what is not. So far, Coinbase’s efforts to be transparent and communicative with the authority do not seem to be rewarded.
It remains to be seen whether this will continue to be the case. As Armstrong aptly notes at the end of his tweet:
“Hopefully, the SEC will provide the clarity this industry deserves without harming consumers and businesses in the process.”
Text credits: Newsbtc
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