Coinbase, the world’s largest cryptocurrency exchange is in hot waters with the US Securities and Exchange Commission. The top financial regulators in the country have reportedly threatened to take the crypto exchange giant to court over non-compliance.
Lashing out at the SEC officials, Coinbase CEO Brian Armstrong on Wednesday took to Twitter and said they have been facing some “really sketchy behaviour coming out of the SEC recently.” He also went to share a series of tweets explaining what was going on with the SEC.
“They refuse to tell us why they think it’s a security, and instead subpoena a bunch of records from us,” said Brian Armstrong explaining the issue.
The problem started with cryptocurrency exchange launching its Coinbase Lend program earlier this year. The program offers 4% annual yield returns on deposits of the USD Coin (USDC) stablecoin. The SEC is now contesting that the program is a security and if they launch the program they would sue the company. Earlier this year, Coinbase went public after securing necessary permissions from the SEC.
“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,” Coinbase CEO said in his statement.
He also claimed that there are already other blockchain-based crypto companies that offer similar services. The change in SEC’s stance and how it is threatening Coinbase is not great news for other competitors, BlockFi and Celcius in particular.
Paul Grewal, chief legal officer of Coinbase, seemed wary in his blog post published on Wednesday: “Customers won’t be ‘investing’ in the program, but rather lending the USDC they hold on Coinbase’s platform in connection with their existing relationship. And although Lend customers will earn interest from their participation in the program, we have an obligation to pay this interest regardless of Coinbase’s broader business activities,” he said.