Posted on

After SEC Pressure, Coinbase Decides To Drop Interest Product

It was just a couple weeks ago that Coinbase posted a blog post, paired with a hefty Twitter thread from CEO Brian Armstrong highlighting recent challenges with the SEC.

Armstrong described the agency’s behavior as “sketchy” after the SEC seemingly threatened the exchange that a lawsuit would be impending should Coinbase launch their expected interest-yielding product, Lend. If Armstrong’s tweet thread didn’t give it away, the company’s blog post, spearheaded by Chief Legal Officer Paul Grewal, was undoubtedly lined with some of the firm’s frustrations.

Now, less than a month later, reports have emerged that Coinbase has elected to halt it’s plans to launch Coinbase Lend.

A Threat To DeFi?

The news comes less than a week after SEC Chairman Gary Gensler told CNBC that his commission is under-staffed. Gensler echoed those sentiments in a Senate testimony last week, stating that the SEC “needs a lot more people.” He added in the testimony that he believed previous judiciary decisions established that many cryptocurrency tokens “do come under the securities law.” Gensler took the role with the SEC earlier this year, and came in with high expectations from retail investors.

Elsewhere in the market, some state regulators seem to be working to try to fill the SEC’s role with interest-yielding products already on the market. A handful of state regulators in recent months started legal action against BlockFi for it’s lending products. In the past week, some state regulators have shifted focus to pursue action against Celsius as well. New Jersey, Texas and Alabama are three states that are pursuing both BlockFi and Celsius with claims that the firms are offering residents unregistered securities.

Regardless of the eventual outcome, the growing popularity of yield-generating tokens and stablecoins are becoming of increased importance to regulators, and are likely bound to be responsible for federal oversight at a higher level than currently seen. The timetable and degree of oversight remains to be seen.

Coinbase is the first crypto exchange to be publicly traded on a major U.S. stock exchange, but has posted modest results in it’s short time on the market. | Source: COIN – NASDAQ on TradingView.com

Related Reading | Mid-Cap Altcoins Hold Onto Highs Better Than Bitcoin And Ethereum

Elsewhere In The Coinbase Rumblings

The powerhouse exchange continues to build on their flagship products to deliver business growth. Last week, the exchange issued a high-demand junk bond with orders amounting to $7B. In recent months, the company announced it’s intent to launch a “crypto app store” and added payment support for Apple Pay.

Safe to say it’s been a busy quarter for the bustling exchange. However, it remains to be seen what the end result is for competitors like BlockFi and Celsius. In the meantime, it seems that Coinbase may be working to try to propose regulatory framework that can help the SEC and other regulatory figures embrace the market without overstepping boundaries for crypto consumers.

Related Reading | Despite Dips, Bitcoin Exchange Reserves Reach Lowest Values Since 2018

Featured image from Pexels, Charts from TradingView.com

Posted on

As SEC Lawsuit Looms, Coinbase CEO Describes The Agency’s Behavior As “Sketchy”

The regulatory battle with DeFi is heating up. The SEC now seemingly has it’s eyes set on arguably the largest cryptocurrency exchange in the United States.

The news comes after five U.S. states sent individual notices to DeFi platform BlockFi in recent weeks. This week, reports have surfaced that Coinbase is facing regulatory scrutiny over it’s upcoming, yield-generating Coinbase Lend product.

Coinbase CEO Brian Armstrong had quite a bit to say about it, describing the SEC behavior as “sketchy”.

Coinbase Expresses Frustration

Coinbase issued a strongly-worded blog post that broke the word over the agency’s threats, titled “The SEC has told us it wants to sue us over Lend. We have no idea why.”

Posted by Coinbase Chief Legal Officer Paul Grewal, the post explains that the government agency issued a Wells notice last week regarding the company’s upcoming Lend product – despite what Coinbase describes as “months of effort by Coinbase to engage productively.” A Wells notice is a regulatory letter that notifies preparation of enforcement action.

The Coinbase Lend product intends to allow consumers to earn 4% APY on stablecoin USDC as a starting point for select interest-earning assets. The blog states that rather than preemptively launching the platform, the company took a proactive approach in advising the SEC regarding it’s intent first. The blog post continues on to state that despite these efforts, along with compliance with reasonable SEC requests, the agency intends to sue should Coinbase launch the Lend platform.

The post closes stating that for the time being, the Lend platform will not launch until at least October, reiterating that “dialogue is at the heart of good regulation.” Unfortunately, it seems to be a one-way conversation thus far.

The SEC is seemingly incentivizing an “ask for forgiveness, rather than permission” policy.

As crypto’s total market cap continues to grow, regulatory question marks becoming increasingly apparent. | Source: CRYPTOCAP – TOTAL on TradingView.com

Related Reading | New To Bitcoin? Learn To Trade Crypto With The NewsBTC Trading Course

It Doesn’t Stop There

Coinbase CEO Brian Armstrong took to Twitter to express some frustration as well. In a tweet thread spanning over twenty tweets long, Armstrong leads off with “some really sketchy behavior coming out of the SEC recently…”

Armstrong goes on to recap the blog post in brief, with the sticking point seeming to be that the SEC is describing the lending feature as a security, without providing any sort of elaboration or specification as to how or why that would be the case.

These circumstances could set a very interesting precedent moving forward on the leeway the SEC is given on how, what, and why the SEC determines what is and isn’t a security. To date, Coinbase’s efforts to be transparent and communicative with the agency don’t seem to be reaping rewards.

We’ll see if that continues to be the case. As Armstrong aptly states to close out his tweet thread, “hopefully the SEC steps up to create the clarity this industry deserves, without harming consumers and companies in the process.”

Related Reading | Panama To Recognize Bitcoin As Payment Alternative, Issues New Regulations

Featured image from Pexels, Charts from TradingView.com