Coinbase has received a warning from the United States Securities and Exchange Commission [SEC] over its high-interest crypto-product, Lend. The product intends to pay a 4% interest to stablecoin owners on their savings. However, this idea did not sit well with regulators and as per Coinbase, “if we launch Lend they intend to sue.”
This move could prove to be the first step for the SEC to monitor such products and sue the company offering them. This also means that this highly competitive space filled with numerous exchanges would have to reevaluate its products before the SEC comes after them.
In response to the SEC’s warning, Coinbase’s Legal Officer Paul Grewal penned a blog post informing the community about this threat. In the same, the exec touched upon the discussions between the SEC and the company about Lend over the last six months.
Plans to announce the product took shape in June. However, the SEC has since been trying to stop Coinbase from going ahead with the product.
When first introduced to the public, Lend was proposed as a high-interest product. It promised to offer a “peace of mind” guarantee as a substitute for the FDIC insurance that is seen with traditional interest-bearing accounts. The product applied only to the USDC stablecoin.
The lack of clarity in the SEC’s concerns over the product offering led Coinbase CEO Brian Armstrong to comment that it may choose to fight the SEC in court as a “last resort.”
In a Twitter thread, Armstrong expressed his disappointment and anger against the SEC. According to the exec, despite trying to work with the agency, the SEC failed to be transparent about its crypto-policies. It is now engaging in “intimidation tactics behind closed doors,” he said.
The CEO of Coinbase also highlighted the same points Ripple has been making all along in its own lawsuit against the SEC.
Ripple CEO Brad Garlinghouse quickly took note of everything happening with Coinbase and tweeted,
The SEC charging prominent exchanges may spell trouble for the crypto-space and other businesses offering similar high yield products that might be deemed securities. In fact, according to many, Coinbase may just be among the first ones. It is likely that other companies may soon make the SEC’s warning list too.
Legal opinions were quick to come in as well, with attorney Preston Byrne tweeting,