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People look at the logo of Coinbase Global Inc, America’s largest cryptocurrency exchange, displayed on the jumbotron Nasdaq MarketSite in Times Square in New York, the United States, April 14, 2021.
Shannon Stapleton | Reuters
Coinbase has been made aware of a possible enforcement action by the Securities and Exchange Commission regarding its interest-generating product, which the company planned to launch in the coming weeks.
The cryptocurrency exchange and services company received a notice from the SEC’s Wells last Wednesday that the regulator intended to sue Coinbase for the product, called Coinbase Lend, the company revealed in an article by blog Tuesday night.
Coinbase shares fell 3% in pre-market trading on Wednesday.
General Counsel Paul Grewal said in the post that the company has been caught off guard by the threat given its efforts to engage with the regulatory agency over the past six months. CEO Brian Armstrong says in a series of tweets that when he visited Washington, DC in May, the SEC “refused” to meet with him.
This visit came shortly after Coinbase became the first publicly traded crypto exchange and about a month after Gary Gensler was confirmed as chairman of the SEC.
“We are committed to obeying the law. Sometimes the law is not clear. So if the SEC wants to issue guidelines, we are also happy to follow it,” he added. Armstrong said.
The product in question is touted as allowing users to earn an annual percentage return of 4% on a so-called stablecoin (USD Coin) by allowing Coinbase to lend these funds to verified borrowers. Coinbase supports USD Coin and guarantees that it can still be exchanged for $ 1. High interest accounts have become popular among crypto users, with companies like BlockFi and Gemini also offering high returns on stablecoin balances and other cryptocurrencies.
Armstrong said when the company initially contacted the SEC for a pre-launch briefing, the regulator responded by saying that the loan function is a security. When the company asked the SEC to help it understand its point of view, the agency responded to a number of requests, which Coinbase complied with, according to Armstrong.
The product launch has been delayed until at least October.
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