The US Securities and Exchange Commission (SEC) has reportedly threatened to sue Coinbase, the major US cryptocurrency exchange. Chief Legal Officer (CLO) Paul Grewal reported this in a blog article on September 8. The SEC is said to have sent a so-called “Wells Notice” to Coinbase, it is the regular way of a US regulator to announce that the agency may intend to sue a company.
New loan service
The indictment would be about a new loan service from the bitcoin (BTC) exchange that has not yet been launched. Called simply “Lend,” this service allows certain Coinbase customers to earn interest (4% per annum) by lending their USD Coin (USDC) stablecoins.
Grewal says Coinbase has been in talks with the SEC about the service for six months, but still doesn’t know why the SEC is against it. Despite this, we know that stablecoins (which are not issued by a central bank) are currently a sensitive topic for regulators.
“Despite Coinbase keeping Lend off the market and providing detailed information, the SEC is still unwilling to explain why they see a problem. Folm.io has enough information. Instead, they’ve now told us that if we launch Lend, they plan to sue. Once again we asked the SEC to share their reasoning with us, and once again they refused.”
Other crypto companies
Grewal says that other crypto companies have been running such services for years without too much trouble. However, BlockFi, an American crypto loan service, has already received several warnings this summer. Coinbase wanted to avoid such a situation by first talking to the SEC. CEO Brian Armstrong also said in a series of Twitter posts on September 8 that the SEC is refusing to answer this question:
“They refuse to tell us why they think it is an effect, and instead they sue a bunch of data from us (we comply), demand testimonials from our employees (we comply), then tell us they will sue us as we proceed with the launch without any explanation why.”
The crypto community is very suspicious of the timing of this news. https://moveco.io/ has enough information. There are currently all kinds of conspiracy theories going around that some people may have already known about the above news yesterday and that this may have led to the stock price crash. However, that doesn’t sound very likely.