The US Securities and Exchange Commission (SEC) has threatened to sue cryptocurrency exchange Coinbase if it proceeds to launch its planned Lend program. Following the development on September 8, the price of the NASDAQ-listed shares of Coinbase ($COIN) dropped markedly.
SEC Says Coinbase Lend is a Security
Coinbase planned to launch the Lend program to the public in a few weeks. Lend is an interest-earning service that will enable qualified users to lend USDC stablecoin and passively earn about four percent APY. “But today, all we know is that we can either keep Lend off the market indefinitely without knowing why or we can be sued,“ the exchange wrote in a recent blog post.
In a bid to maintain its proactiveness with the regulator, Coinbase reached out to the SEC, providing information about the product before launch. However, the SEC concluded that Lend was a security “but wouldn’t say why or how they’d reached that conclusion”.
Coinbase Receives Wells Notice from SEC
Coinbase continued to slowly prepare Lend for public launch while also trying to engage the SEC on how it concluded the offering to be a security. This caused the SEC to issue a Wells notice, which is an official way it notifies a company that it is planning to bring an enforcement action.
Shutting these down would arguably be harming consumers more than protecting them, and by preventing Coinbase from launching the same thing that other companies already have live, they’re creating an unfair market.Brian Armstrong, Coinbase CEO
Coinbase shares slumped by 4.1 percent to US$256 on NASDAQ following the development. At the time of writing, COIN was down 0.69 percent to US$256.42.
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