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US SEC threatens to sue Coinbase over lending product

Coinbase, the largest cryptocurrency exchange in the United States, said on Wednesday that it was threatened to be sued by the US Securities and Exchange Commission (SEC) over a proposed financial product that would let customers earn interest on digital asset deposits.
Coinbase chief legal officer, Paul Grewal said in a blog post that the SEC, which regulates financial institutions in the United States, has issued Coinbase with a Wells notice, which is its official way of telling a company that it intends to sue it in court.

Grewal said that the SEC’s concerns about Coinbase’s Lend product were related to the fact that the regulator believed the product involved security. its Lend product could violate securities laws
Grewal said Coinbase felt that this was not the case.
In his response, the CEO of Coinbase, Brian Armstrong, took to Twitter to express his displeasure. Armstrong tweeted today that there has been some “really sketchy behavior coming out of the SEC recently,” before starting a thread on Twitter, detailing the company’s engagement with the SEC.

In the Twitter thread, Armstrong explained that cryptocurrency companies have been offering crypto yield programs for many years and Coinbase made its decision to offer its own version of it.
The Coinbase boss stated: “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 reconfirms his willingness and that of Coinbase to follow the law while encouraging the SEC to provide clarity on the subject matter and enforce them evenly across the industry.
In his words, “Look…. we’re committed to following the law. Sometimes the law is unclear. So if the SEC wants to publish guidance, we are also happy to follow that (it’s nice if you actually enforce it evenly across the industry equally btw).”

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