Major US cryptocurrencies exchange Coinbase recently received a Wells Notice from the US Securities and Exchange Commission against rolling out its “Lend” program.
According to the blog post issued by Coinbase’s Chief Legal Officer, Paul Grewal, the company had been productively engaging with the SEC for the past six months over its new lending product that would offer 4% interest to stablecoin owners on their savings.
However, despite many attempts of discussion, the SEC has threatened to sue the exchange if they launch the new product, without offering any reason for the same.
Coinbase’s new product ‘Lend’ program seeks to offer 4% interest to eligible customers by lending the customers’ stablecoins to verified borrowers.
Throughout the discussion, Coinbase claimed it has provided all the relevant information and documents related to the new program. The only explanation the SEC has offered was related to the decades-old Supreme Court cases called Howey and Reves. The exchange wrote:
“Formal guidance from the SEC about how they intend to apply Howey and Reves tests to products like Lend would be a big help to regulating our industry in a responsible way. Instead, last week’s Wells notice tells us that the SEC would rather skip those basic regulatory steps and go right to litigation.”
Coinbase CEO Brian Armstrong took to Twitter to express his discontent with the SEC’s legal threat. He explained that the exchange had followed all the necessary protocols it was required to do, however, the SEC failed to be transparent about its policies.