Leading cryptocurrency exchange Coinbase announced that it received a Wells Notice from the Securities and Exchange Commission. The regulatory agency warned the company against launching a product that would allow consumers to earn interest for their crypto holdings.
A Wells Notice represents a formal notification meant to inform entrepreneurs about discovered violations and possible legal actions. In the letter, the SEC mentioned it will bring an enforcement action if the company launches its Lend product. The product aims to offer 4% returns on the USDC stablecoin deposits yearly.
As a response, Coinbase expressed its surprise via a blog post and added it will put off the release of the program at least until October.The CEO of the company, Brian Armstrong stated that the team turned to the regulator before the launch of its product. Although various companies have been offering crypto lending for years, the SEC said a lending feature is security but didn't make their views clear.
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.— Brian Armstrong (@brian_armstrong) September 8, 2021
Armstrong says Coinbase is committed to following the law, but first the law needs to be clear.