Why the SEC threatens to sue Coinbase?

The US Securities and Exchange Commission (SEC) has threatened to sue Coinbase over its cryptocurrency profitability program, which it regards as security.

Coinbase CEO Brian Armstrong detailed the situation between the firm and the SEC on Twitter. He explained that earlier this year, the cryptocurrency exchange approached the SEC with a request to inform law enforcement about the promising Coinbase Lend program, which intends to offer a 4% annual return on USDC stablecoin deposits.

In response to Coinbase’s appeal, the SEC said without any explanation that the lending program was a security, and threatened to sue if the service was launched:

“They refuse to tell us why they consider the program to be a security,” Armstrong wrote. “They demand a bunch of tapes and testimonies from our staff. We provide them. But then, without giving any reason, they tell us that they will sue us if we run the program. ”

Armstrong noted that other crypto firms are currently providing similar lending services to their clients. Therefore, he called on the SEC to bring regulatory clarity to this topic.

Coinbase Chief Legal Officer Paul Greval raised concerns about the SEC’s actions, questioning the claim that the lending function could be viewed as an “investment contract or note”.

According to him, clients will not invest in the program, but rather will lend the USDC stored on the platform, and then they will receive interest for participating in the program. This interest will be paid regardless of Coinbase’s business activities.

Greval is outraged by the lack of clarification from the Commission and added that regulators should never leave the industry in limbo without explanation.

He said the company will postpone the launch of the lending program until at least October while they await further feedback from the SEC.

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