Popular cryptocurrency trade platform Coinbase has found itself on the losing end of the stock market and SEC recently. The company has been planning to offer an interest-building crypto product called Coinbase lend for a little while now, but stocks dropped when Coinbase revealed that it is facing possible enforcement action from the SEC over the issues related to the Lend product. Coinbase may be headed to court with the SEC soon.
Coinbase divulged its recent legal issues with the SEC in a blog post posted on September 7, 2021, as reported by CNBC. Coinbase claims the matter is in regards to Coinbase Lend - an upcoming interest-building crypto product it intended to launch within the coming month. Though Coinbase has claimed to be working proactively with the SEC to ensure that Coinbase Lend was on the level, the SEC reportedly sent Coinbase a Wells notice regardless - a notification in which regulators inform companies that infractions have been discovered in investigations. Coinbase also claims it has attempted to contact the SEC over the matter and has not received clarification over why the Wells Notice was issued.
The only thing the SEC had apparently told Coinbase was that its investigation led the former to conclude that Coinbase Lend “involve[d] a security, but wouldn’t say why or how they’d reached that conclusion.” The only thing that is certain is that the SEC has threatened that if Coinbase Lend launches, it will sue using Supreme Court cases Howey and Reves as the basis of the litigation against Lend. Though again, the SEC did not explain how it intended to use these cases in the matter.
As a result of the issue, Coinbase has chosen to delay Lend as it signaled its intention to remain transparent with customers, not break laws, and work with the SEC to the best of its reasonable ability. However, stock prices have still fallen this week on the news and have only slightly climbed out of the slump since. It will remain to be seen what steps, if any, would allow Coinbase to launch Lend with the SEC issue lingering overhead. Stay tuned to Coinbase and cryptocurrency topics at Shacknews as we continue to follow this story.