SEC threatens to sue Coinbase over crypto lending scheme

HONG KONG, Sept. 8 (Reuters) – The United States Securities and Exchange Commission (SEC) has threatened to sue Coinbase Global Inc (COIN.O) if the crypto exchange goes ahead with its plan to launch a program that allows users to earn interest by lending active cryptos, Coinbase said on Wednesday.

The SEC has sent Coinbase a Wells Notice, an official way to let a company know that it intends to sue the company, Paul Grewal, the company’s legal director, said in a blog post. As a result, he said Coinbase will delay the launch of its “Lend” product until at least October.

Coinbase shares fell about 2.5% to $ 260 at 08:45 GMT in pre-market trading on Wednesday.

Programs that allow owners of cryptocurrencies to lend them out for interest are increasingly common around the world, but some regulators, particularly in the United States, have started to voice concerns, arguing that these products should comply with existing securities laws.

The U.S. state of New Jersey in July ordered cryptocurrency platform BlockFi Inc to stop offering interest-bearing accounts that have raised $ 14.7 billion from investors.

Grewal said in his blog that the SEC’s concerns over the Coinbase “Loan” were related to the regulator’s belief that the product involved a security. Grewal said Coinbase believes this is not the case.

The SEC did not respond to an out-of-hours email request for comment.

Reporting by Alun John in Hong Kong and Kanishka Singh in Bengaluru; Editing by Ana Nicolaci da Costa

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