Coinbase Global Inc (NASDAQ:COIN). said it has been warned that the US Securities and Exchange Commission will pursue legal action against the crypto exchange if it goes ahead with the launch of its Lend product.
The SEC has issued Coinbase with a Wells notice about Lend, the company’s chief legal officer Paul Grewal said in a blog post. A Wells notice is the official way a regulator tells a company that it intends to sue the company in court, he explained.
The Lend programme would allow eligible customers to earn interest on select assets on Coinbase. The SEC considers Lend to involve a security, hence its concerns, but Grewal said this is not the case.
Lend “is not an investment contract or a note”, he said in his blog post. “Customers won’t be “investing” in the program, but rather lending the USD Coin they hold on Coinbase’s platform in connection with their existing relationship.”
Separately, in a Twitter thread, Coinbase’s chief executive Brian Armstrong accused the SEC of “sketchy behaviour”.
“They are refusing to offer any opinion in writing to the industry on what should be allowed and why, and instead are engaging in intimidation tactics behind closed doors,” Armstrong tweeted.
“If you don’t want this activity, then simply publish your position, in writing, and enforce it evenly across the industry.”
Coinbase said it has decided to postpone the launch of Lend until at least October.