The SEC has warned cryptocurrency exchange Coinbase of a possible legal action if the company launches a high-yield savings product for the USDC stablecoin.
Coinbase Chief Legal Officer Paul Grewal posted the warning he received from the US Securities and Exchange Commission (SEC) on his blog. In the article, Greval described how the company had been in talks with the SEC to launch the Lend product for six months, but last Wednesday the agency suddenly warned the company that it could sue if Coinbase launched the product.
Coinbase has publicly announced plans to launch Lend in June. At the time, the company touted the product as a way for cryptocurrency holders to earn high interest rates on their assets and promised to offer a “peace of mind” guarantee instead of the FDIC insurance that is provided for accounts at traditional banks.
A highly profitable product, implying the placement of cryptoassets at 4% annual income, was planned to be launched only for the USDC stablecoin. In response to the SEC threat, Coinbase CEO Brian Armstrong said on Twitter that his company tried to do the right thing, but the SEC was unable to ensure transparency of its cryptocurrency policy and instead “used intimidation tactics behind closed doors.”
Armstrong also complained that the SEC failed to enforce its policy in a consistent manner, allowing other companies that did not get agency approval to operate for months. He also hinted that Coinbase may decide to fight the SEC in court, but called it a “last resort.”
Cryptocurrency lawyer Preston Byrne tweeted that any interest income product is subject to securities laws and is subject to SEC regulation. However, he added that other countries, including the UK, have developed legal mechanisms to facilitate the launch of such products, and that the US should do the same.
The CEO of Ripple, whose company is involved in a lawsuit with the SEC, tweeted a popular meme from the movie Die Hard to “welcome Coinbase to the party.” Coinbase recently announced that UK and German customers will be able to earn staking rewards on the Ethereum 2.0 blockchain.
