The Securities and Exchange Commission (SEC) of the United States has reportedly threatened to sue Coinbase for a crypto dividend program that it considers security.
Coinbase CEO Brian Armstrong tweeted on September 8 that the SEC has been engaging in “really dodgy conduct recently”. This was before launching into a 21-post thread documenting the SEC’s relations with the firm.
Armstrong also stated that the crypto exchange approached the SEC earlier this year to update the impending Coinbase Lend program. It promises to offer a 4 percent annual yield back on USDC stablecoin deposits.
Armstrong said that other crypto enterprises on the market now offer comparable loan services to their consumers. He urged the SEC to provide regulatory clarification on the subject. If Armstrong’s reporting is correct, the SEC’s moves appear to be bad news for competitors BlockFi and Celsius, which already provide crypto income products. BlockFi investigated in several states for its high-interest products.
In a blog post published today, Coinbase’s Chief Legal Officer, Paul Grewal, voiced his dismay at the SEC’s actions. He is questioning the premise that the lending feature may be considered an investment contract or a note. Customers will not be ‘investing in the initiative but instead lending the USDC they possess on Coinbase’s platform as part of their current relationship. And, while Lend customers will earn interest due to their participation in the program, we must pay this interest regardless of Coinbase’s broader commercial activities.
Grewal said that the firm’s sole clarity is that the loan program is now evaluate using the Howey Test.
Bitcoin is the internet of value transfer
The crypto market has returned to significant price fluctuations, with Bitcoin (BTC) experiencing a price fall on Tuesday, the day the largest cryptocurrency became legal cash in El Salvador. Many crypto veterans, including Galaxy Digital CEO Mike Novogratz, were ready for this news. According to the billionaire Bitcoin bull, crypto still dominates by retail investors who are “overjoyed” by recent interest from institutions such as Visa and Amazon.
Lastly, according to Novogratz, retail investors have been overly reliant on leverage for a good cause. They highlighted recent crypto-friendly news from finance and retail titans. These include as Visa buying nonfungible tokens and describing them as a suitable medium. Also, Walmart’s pursuit of a crypto product lead and Amazon job postings for crypto experts. Novogratz’s comments echo those of other analysts who have pointed to overleveraged traders after the Bitcoin price decline. On September 7, the largest cryptocurrency fell sharply to $43,000, liquidating more than $3.54 billion in derivative markets. At the time of writing, BTC was trading around $45,000.