Coinbase Under Scrutiny
After receiving notice that regulators intend to sue, Coinbase’s CEO Brian Armstrong slammed the Securities and Exchange Commission for “really sketchy behavior.” The SEC issued a Wells notice, indicating that it may seek enforcement action, and launched a formal investigation.
The issue centers on Coinbase’s product called Lend, which the company has marketed as a high-yield alternative to traditional savings accounts that could earn an annual yield of 4%. The product hasn’t been launched yet, but Coinbase encouraged customers to sign up for pre-enrollment in June.
In a Twitter thread, CEO Brian Armstrong said that if the SEC tries to shut down its new loan product, it will be creating an unfair market. He also said, “We’re being threatened with legal action before a single bit of actual guidance has been given to the industry,” “Regulation by litigation should be the last resort for the SEC, not the first.”
Coinbase stated that it has been “proactively engaging” the SEC on Lend for the past six months and expressed surprise at the potential legal action. So, it seems Coinbase may have been blindsided. As a result of the SEC’s efforts, Coinbase has stated that it would not launch Lend until at least October.
Ex-SEC officials have also privately expressed surprise at the SEC’s move, which Coinbase revealed in a blog post on Tuesday. According to the former officials, the SEC usually waits until businesses begin selling investments before publicizing potential fines, implying that the agency has created a strong approach to shut down crypto offers that it believes are endangering consumers.
Do you think the SEC is publicizing potential sanctions on Coinbase to protect investors, or might the agency have another motive?
I am not a financial advisor and my comments should never be taken as financial advice. Investments come with risk, so always do your research and analysis beforehand.