SEC plans to sue  Coinbase serving a Wells Notice over interest-earning product Coinbase Lend

 

Coinbase has received notice from the SEC regarding an enforcement action about its interest-earning product called Coinbase Lend. Shares fell Wednesday on the news just a few weeks before the new product was scheduled for launch.

The cryptocurrency exchange and services company was sent a  a Wells notice from the SEC last Wednesday mentioning the SEC may  sue Coinbase over the product  “Coinbase Lend”.

Coin Lend allows  users to earn a 4% annual percentage yield on a  Stablecoin (USD Coin) in which  Coinbase Lend to the  borrowers. Coinbase backs USD Coin and promised  it can always be redeemed for $1. Other companies  also offer high- yields on Stablecoin and other cryptocurrency balances. Companies include, Gemini and BlockFi offering the service.

Technically the product in questions is  a security and is not  an investment contract or a note. Customers are not investing with this product , but rather lending the USDC they hold on Coinbase’s platform in connection with their existing relationship. “The SEC has told us it wants to sue us over  Coin Lend. We don’t know why.” Coinbase said in a press release on its investor relations page.

The company states-“ Last Wednesday, after months of effort by Coinbase to engage productively, the SEC gave us what’s called a Wells notice about our planned Coinbase Lend program. A Wells notice is the official way a regulator tells a company that it intends to sue the company in court. As surprised as we were at the SEC’s threat to sue without ever telling us why, we want to be transparent with you about the course of events leading up to it.”

“Coinbase has been proactively engaging with the SEC about Lend for nearly six months. We’ve been eager to hear their perspective as we explore innovative ways for our customers to gain more financial empowerment on Coinbase. Specifically, for Coinbase Lend, we’re seeking to allow eligible customers to earn interest on select assets on Coinbase, starting with 4% APY on USD Coin (USDC)” the press statement further reports.


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