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Cryptocurrency exchange Coinbase revealed that the U.S. Securities and Exchange Commission (SEC) has threatened to sue the company over its yet-to-be-launched “Lend” program.
Coinbase had been in discussions with the SEC over its program for almost six months and despite these ongoing talks, the SEC issued Coinbase a “Wells Notice.” A Wells Notice is a formal way of announcing that the regulator may bring charges against a company or its employees.
This was shared on Coinbase’s company blog, where Chief Legal Officer, Paul Grewal, expressed his disbelief at the SEC’s position as he questioned the assertion the lending feature can be deemed as an “investment contract or a note.”
According to Grewal, the SEC will not provide any explanation over why there is an issue with its “Lend” program. He wrote:
“Rather they have now told us that if we launch Lend they intend to sue.”
Coinbase Chief Executive Officer, Brian Armstrong also went public as he shared his dismay on Twitter. “They refuse to tell us why they think it’s a security, and instead subpoena a bunch of records from us, he said.
Coinbase’s Lend program aims to provide eligible customers a 4% annualized percentage yield by lending out USD Coin (USDC) to “verified borrowers.”