Coinbase Shares Tumble on News that the SEC Plans to Do This

Shares of Coinbase were falling on Wednesday after Wall Street learned that the SEC is aiming to sue over interest-earning product.

The crypto exchange and services company had received notice of a possible enforcement action from the SEC related to its interest-earning product called Coinbase Lend.
Coinbase had been planning to launch the product in the coming weeks.

The company received a Wells notice from the SEC last Wednesday saying the regulator intends to sue Coinbase over the product, called Coinbase Lend, the company disclosed in a Tuesday night blog post.

Subsequently on Wednesday shares had fallen 3.2%.

Chief legal officer, Paul Grewal, indicated in the post that the company was caught off guard by the threat. The company had made efforts to engage with the regulatory agency for the last six months.

Company CEO Brian Armstrong said in a series of tweets that when he traveled to Washington, D.C. in May, the SEC “refused” to meet with him.

“We’re committed to following the law. Sometimes the law is unclear. So if the SEC wants to publish guidance, we are also happy to follow that,” Armstrong tweeted.

The product would have allowed users to earn a 4% annual percentage yield on a so-called stablecoin (USD Coin) by allowing Coinbase to lend those funds to verified borrowers.

According to Armstrong, when Coinbase had initially reached out to the SEC for a briefing ahead of the launch, the regulator responded by saying the Lend feature is a security. When the company asked the SEC to help it understand their view, the agency responded with a number of demands, with which Coinbase complied, according to Armstrong.

The launch of the product has now been delayed until at least October.

Disclaimer: We have no position in any of the companies mentioned and have not been compensated for this article.