Coinbase was planning to launch a cryptocurrency lending service, but the Securities and Exchange Commission (SEC) has threatened to take legal action if it proceeds. That’s according to a blog post by Coinbase’s Chief Legal Officer, Paul Grewal, and a Twitter thread by Coinbase’s CEO Brian Armstrong. The SEC is alleging that a crypto loan is an unregulated security. Coinbase claims that the SEC hasn’t clarified why crypto lending is considered a security. However, the blog post revealed a legal case upon which the SEC says it’s relying.
The United States legal system relies on case law, so by providing the case the SEC IS providing the reason.
As context, crypto lending has been happening for some time but only took off in a big way last year. Without any supervision, there’s not a lot stopping crypto lenders from running massive Ponzi schemes. Just last week, the SEC started litigation against one that cost investors $2 billion, and that one had a lot of red flags.
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