# U.S. markets regulator takes aim at Coinbase lending product Author: Pal Sinha, Barnali Author URL: https://financedigest.com/author/pal-sinha-barnali Published: 2021-09-09 Category: BUSINESS Category URL: https://financedigest.com/category/business Meta Title: SEC Plans to Sue Coinbase Over Lending Program Dispute Meta Description: SEC plans to sue Coinbase if it launches a lending programme for users to earn interest, sparking tensions between crypto industry and regulators. URL: https://financedigest.com/u-s-markets-regulator-takes-aim-at-coinbase-lending-producthtml ![undefined](https://prod.superblogcdn.com/site_cuid_cm5qst7v3003gwirgwqtxn8i8/images/2021-09-08t224353z3lynxmpeh87078rtroptp4coinbase-results-1736837913022-compressed.jpg) WASHINGTON/HONG KONG (Reuters) -The U.S. Securities and Exchange Commission has told Coinbase Global Inc that it plans to sue the cryptocurrency exchange if it goes ahead with plans to launch a programme allowing users to earn interest by lending digital assets, Coinbase said. The top U.S. markets regulator last week told Coinbase it intends to legally charge the company, [Coinbase’s chief](https://www.financedigest.com/crypto-firms-will-develop-offshore-without-clear-us-rules-coinbase-chief-says.html "Crypto firms will develop ‘offshore’ without clear US rules, Coinbase chief says") legal officer, Paul Grewal, said a statement on Tuesday, noting that the firm now plans to delay the launch of its ‘Lend’ product until at least October. An SEC spokesperson declined to comment. In a lengthy Twitter thread, Coinbase [CEO Brian Armstrong criticized the agency’s handling of the firm’s](https://www.financedigest.com/exclusive-crypto-giant-binance-moved-400-million-from-u-s-partner-to-firm-managed-by-ceo-zhao.html "Exclusive-Crypto giant Binance moved 0 million from U.S. partner to firm managed by CEO Zhao") plans to roll out a lending product the SEC has determined to be a security and said the agency had denied him a meeting. Both the CEO and [chief legal officer](https://www.financedigest.com/host-analytics-appoints-chris-labruna-as-chief-revenue-officer.html "Host Analytics Appoints Chris LaBruna as Chief Revenue Officer") said Coinbase disputes the SEC’s determination, saying ‘Lend’ is not an investment contract or note. The executive’s remarks provide a glimpse into the rising tension between the crypto [industry and regulators](https://www.financedigest.com/how-solvency-ii-transformed-itself-the-fund-industry-and-regulation.html "How Solvency II transformed itself, the fund industry and regulation"), which have been ratcheting up scrutiny of a world that has so far existed in a regulatory gray area. Crypto proponents have hoped that Gary Gensler, who became SEC chair in April, would bring clear, broad [rules to the industry](https://www.financedigest.com/ipc-introduces-industrys-first-compliance-policy-engine-automating-proactive-financial-communications-rule-enforcement.html "IPC introduces industry’s first compliance policy engine, automating proactive financial communications rule enforcement") but so far have been disappointed by the SEC’s more watchful gaze. Gensler is [seeking more authority for the agency to oversee a world he described last month as a “Wild West” riddled with fraud and investor risk](https://www.financedigest.com/risking-death-at-sea-rohingya-muslims-seek-safety-in-indonesia.html "Risking death at sea, Rohingya Muslims seek safety in Indonesia"). He has said some [digital assets and platforms are operating as or offering securities](https://www.financedigest.com/what-banks-need-to-do-right-now-to-improve-their-digital-services-without-sacrificing-security.html "What Banks Need to Do Right Now to Improve Their Digital Services Without Sacrificing Security "), bringing them under the SEC’s oversight. Company executives said they were surprised when the [firm received the legal](https://www.financedigest.com/some-credit-suisse-at1-bondholders-seek-legal-advice-law-firms.html "Some Credit Suisse AT1 bondholders seek legal advice -law firms") notice after notifying the SEC of plans to move ahead with ‘Lend. An [SEC official said the agency has held meetings with Coinbase](https://www.financedigest.com/analysis-us-sec-crackdown-on-coinbase-binance-puts-crypto-exchanges-on-notice.html "Analysis-US SEC crackdown on Coinbase, Binance puts crypto exchanges on notice") representatives. Programmes that allow owners of cryptocurrencies to [lend them in return for interest are becoming more common around the world](https://www.financedigest.com/post-crash-banking-regulation-is-transforming-the-world-of-corporate-lending-for-the-better.html "Post-crash banking regulation is transforming the world of corporate lending – for the better"), but some regulators, particularly in the United States, have started to raise concerns, arguing that such products should comply with existing securities laws. The U.S. state of New Jersey ordered the cryptocurrency platform BlockFi Inc https://www.reuters.com/legal/transactional/new-jersey-orders-blockfi-cryptocurrency-firm-stop-offering-interest-bearing-2021-07-20 in July to stop [offering interest-bearing accounts that have raised $14.7 billion](https://www.financedigest.com/copper-miner-teck-resources-rejects-glencores-22-5-billion-offer.html "Copper miner Teck Resources rejects Glencore’s .5 billion offer") from investors. “If we end up in court we may finally get the regulatory clarity the SEC refuses to provide. But [regulation by litigation](https://www.financedigest.com/auditor-regulation-and-litigation-down-to-the-wirecard.html "Auditor regulation and litigation – down to the Wire(card)?") should be the last resort for the SEC, not the first,” Armstrong said on Twitter. Shares of Coinbase were down over 2% by 3:10 p.m. EDT (1904 GMT). (Reporting by Chris Prentice in Washington, Alun John in [Hong Kong](https://www.financedigest.com/screening-of-winnie-the-pooh-horror-film-cancelled-in-hong-kong.html "Screening of ‘Winnie the Pooh’ horror film cancelled in Hong Kong") and Kanishka Singh in Bengaluru; Editing by Ana Nicolaci da Costa and Mark Porter) --- This blog is powered by Superblog. Visit https://superblog.ai to know more. ---