Coinbase CEO Brian Armstrong accused the U.S. Securities and Exchange Commission of "engaging in intimidation tactics behind closed doors" on Twitter after it blocked the launch of the company's Lend program without explanation.
Lend is supposed to provide a platform through which USD Coin owners can, well, lend their cryptocurrency to other people in exchange for a 4 percent Annual Percentage Yield (APY). Coinbase would guarantee the principal on any loans and ensure the lent USD Coin is only going to "verified borrowers" in most of the U.S.
Armstrong said yesterday that Coinbase was "planning to go live in a few weeks," so the company "reached out to the SEC to give them a friendly heads up and briefing." (Which seems like an odd way to characterize notifying a regulator about a new product, but it shows that Coinbase believed the process would be quick, at least.)
But it seems the exchange wasn't friendly for long:
6/ 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.September 8, 2021
Armstrong said this wasn't the first time Coinbase was snubbed by the SEC. He said he met with "members of Congress and heads of various federal agencies" shortly after the company went public in April, but "the SEC was the only regulator that refused to meet with me, saying 'we're not meeting with any crypto companies'."
That comes as a surprise given the SEC's increasing activity in the crypto scene. The commission has recently targeted fake cryptocurrency trading bots, settled complaints about companies violating financial regulations, and published guidance for investors in an effort to protect them from falling prey to crypto-related scams.
Coinbase also published a blog post attributed to Paul Grewal, its chief legal officer, explaining that the SEC threatened to sue the company if Lend goes live. "The net result of all this is that we will not be launching Lend until at least October," Grewal said, but that might change as the back-and-forth over the program continues.
The SEC filing a lawsuit might not actually be the worst outcome. "If we end up in court we may finally get the regulatory clarity the SEC refuses to provide," Armstrong said. "But regulation by litigation should be the last resort for the SEC, not the first."