Brian Armstrong took to Twitter on Sept. 8 to defend his company’s position against the latest onslaught from Uncle Sam’s heavy-handed financial regulator, the SEC.
In a blog post titled “The SEC has told us it wants to sue us over Lend. We don’t know why.” Coinbase’s Chief Legal Officer, Paul Grewal, explained the situation further.
It states that the company was issued a “Wells notice” by the SEC, explaining that this is the official way a regulator tells a firm that it intends to sue it in court.
An incensed Armstrong said that millions of people have been lending out crypto assets for several years to earn yields. He added that Coinbase, which had record $2 billion Q2 revenue, had reached out to the SEC to brief them on the planned Coinbase Lend program.
The Lend incentive, which has yet to launch, enables “eligible users” in the U.S. only to earn 4% annual yields on USDC deposits with a guaranteed principal.
Apparently, the regulator, which has increased DeFi monitoring recently, views lending and interest-earning as security, much to the chagrin of the Coinbase boss who added:
“They responded by telling us this lend feature is a security. Ok – seems strange, how can lending be a security? So we ask the SEC to help us understand and share their view.”
He added that the company has complied with the never-ending demands from the SEC but is exasperated as to why they consider people depositing their own funds to earn a yield a “security.”
“They refuse to tell us why they think it’s a security, and instead subpoena a bunch of records from us (we comply), demand testimony from our employees (we comply), and then tell us they will be suing us if we proceed to launch, with zero explanation as to why.”
Armstrong stated that Coinbase is happy to comply with the law and regulators, but the SEC will not provide clarity but instead engages in “intimidation tactics behind closed doors.”
He added that many other crypto companies were offering similar products suggesting that somehow, Coinbase had been singled out. The tirade concluded with “hopefully the SEC steps up to create the clarity this industry deserves, without harming consumers and companies in the process.”
Coinbase stated that as a result of all the action, it will not be launching Lend until at least October. In reality, it may never see the light of day.