The U.S. Securities and Exchange Commission (SEC) has warned Coinbase that it will sue the company if they plan to launch its new Lend product that offers up to 4% interest on stablecoin savings.
According to an official blog post on Sept. 8, Coinbase’s Chief Legal Officer Paul Grewal said that the U.S. Securities and Exchange Commission (SEC) has threatened to sue the company if they proceed to launch its Yield product without providing any explanation.
The crypto platform was planning to launch its high-interest yield product which was supposed to go live in a few weeks. It was intended to provide customers with the ability to earn up to 4% annual yield return on deposits on the USDC stablecoin.
Instead of reaching out to the SEC, the company could have launched the product but decided not to do so. Highlighting that other crypto companies like BlockFi and Celsius have had lending products for years, Coinbase called for the agency to provide regulatory clarity on the topic.
According to Coinbase CEO, the SEC instead labelled the new programme as a security without any further explanation and threatened to sue the company if they proceed with the launch.
“They refuse to tell us why they think it's a security, and instead subpoena a bunch of records from us (we comply), demand testimony from our employees (we comply), and then tell us they will be suing us if we proceed to launch, with zero explanation as to why.”
Clarifying in the blog post, Coinbase Chief Legal Officer Paul Grewal argued that the lending product did not qualify as a security as it is neither a contract nor a note.
“We shared this view and the details of Lend with the SEC. After our initial meeting, we answered all of the SEC’s questions in writing and then again in person. But we didn’t get much of a response.”
As of now, Coinbase has pushed forward the launch date of the lending programme at least until October and has assured to keep customers informed on every step as things unfold.