There’s a storm brewing in the defi lending sector, with new reports that the U.S. Securities and Exchange Commission has mysteriously put Coinbase on notice that the agency will sue over any launch of the exchanges new proposed Lend program.
Coinbase’s proposal to allow registered accounts to gain interest on staked cryptocurrency is not unusual – other companies have been managing similar services for years.
Despite that reality, Sebastian Sinclair at Coindesk reports the SEC has issued a regulatory letter called a “Wells notice” to Coinbase regarding the plans to operate Lend. In short, the agency says it will sue, without saying why.
“A spokesperson for the SEC did not immediately return a request for comment,” Sinclair writes.
This is important partly because of Coinbase’s growing role in the crypto currency exchange world – after a direct listing ICO in past months, Coinbase and its COIN token have become a popular way for investors to get involved in cryptocurrency. It has also burnished its brand, leading to the question: what’s going on with the SEC?
A blog post by Paul Grewal, chief legal officer of Coinbase, lays out the exchange’s position, which really paints the SEC in an unflattering light.
“Coinbase has been proactively engaging with the SEC about Lend for nearly six months,” Grewal writes. “We’ve been eager to hear their perspective as we explore innovative ways for our customers to gain more financial empowerment on Coinbase. … We could have simply launched the product but we chose not to. This is far from the norm in our industry. Other crypto companies have had lending products on the market for years, and new lending products continue to launch as recently as last month. But Coinbase believes in the value of open and substantive dialogue with our regulators. So we took Lend to the SEC first.”
You really have to read through Grewal’s missive to understand how strange this makes the SEC look. We’ll let you know if the agency says anything about its newest project.