Coinbase said Wednesday that a US regulator intends to sue it in court if it launches a planned program letting users earn interest on lending cryptocurrency.
The New York-listed cryptocurrency platform — the largest US exchange for bitcoin and other private digital currencies — said that the Securities and Exchange Commission handed it a Wells notice in relation to its Coinbase Lend program, signaling its intention to sue the company in court. As a result, Coinbase said it won’t launch Lend until at least October.
The platform said it has been engaging with the SEC for nearly six months and that it didn’t believe its Lend program qualified as a security, which it asserted was the regulator’s main concern.
The SEC didn’t immediately respond to a request for comment. On 1 September, SEC chairman Gary Gensler issued a warning to the cryptocurrency market, urging companies to ask for permission before launching a product, rather than begging for forgiveness.
READ Four key takeaways from Coinbase’s quarterly earnings
“Despite Coinbase keeping Lend off the market and providing detailed information, the SEC still won’t explain why they see a problem,” chief legal officer Paul Grewal said in a blog post.
Coinbase also said that the agency is assessing it through Supreme Court cases Howey, from 1946, and Reves, from 1990, and while it has offered the company a chance to submit a written defense it would be futile without knowing the reasons behind the SEC’s concerns. The company said it will welcome further regulatory clarity.
READ Tech giants shift to hybrid working as Coinbase ditches Silicon Valley base
In recent months, regulators have taken increased interest in the cryptocurrency market. Financial News sister title The Wall Street Journal reported Friday that the SEC launched a probe into Uniswap Labs, the main developer of the world’s largest decentralized exchange, and on 1 September it accused crypto platform BitConnect of defrauding retail investors out of $2bn.
Write to Joe Hoppe at joseph.hoppe@wsj.com
This article was published on Dow Jones Newswires