High-interest rate of crypto products has made SEC threaten to sue Coinbase. This will likely frustrate users who see the company’s offer as a practical means of earning 4% interest.
The Securities and Exchange Commission SEC issued a surprising warning to sue Coinbase if they move on with their plan. Coinbase had initially announced its new product offer, Lend, which pays a 4% interest on stable-coin savings product in June.
This unexpected SECs move poses a setback for the crypto exchange and may affect other companies with high-yield crypto products.
In a blog post, the Coinbase Chief Legal Officer, Paul Grewal, talked about the SEC threat on Tuesday night. He explained how the crypto company had been discussing with SEC on the Lend product for about six months now. But SEC just came issuing a warning to sue Coinbase if they moved on with the offer last Wednesday.
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The crypto exchange made a public announcement in June stating its intention to launch the new project Lend.
Then, Coinbase touted Lend as a means crypto owners would earn a very high interest compared to regular bank’s offers. In addition, the product promised to guarantee them peace of mind to substitute the FDIC insurance coming with traditional interest-bearing accounts.
At the time of the Coinbase announcement, the Legend product proposal never appeared controversial. The high interest of the product applies to only USDC stable coins that are similar to cash. The approach is more conservative than to BlockFi and the likes. For several months, they advertised about 8% returns on different assets.
Statements From Coinbase CEO
Brain Armstrong Coinbase CEO while responding to the SEC threat, lashed out at them on Twitter. He complained that Coinbase wanted to do the needful, but SEC failed in transparency regarding its policies on cryptocurrencies. Instead, they secretly use intimidation tactics, refusing to pen down their opinions to the company on their requirements.
The CEO also complained of SEC’s failure to implement its policies evenly. For example, he added that they failed to allow companies that didn’t pass gain SEC’s approval to initially operate for some months.
Armstrong hinted that his company may decide to apprehend SEC in court but said it’s the last resort. He added that obtaining regulation via litigation should be SEC’s last resort; it’s not supposed to be the first.
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A renowned crypto attorney, Preston Byrne, tweeted that products promising yields are securities following the law. Therefore, they are subject to SEC’s regulation, although other countries like the UK use other legal means to facilitate similar offerings. Byrne recommends that the US should follow the same pattern.
However, Ripple is another company entrapped in its high stake SEC lawsuit. The CEO of the digital currency tweeted a meme coined from the Die Hard movie welcoming Coinbase to the group.
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