Support for Coinbase and its CEO, Brian Armstrong, has been pouring in from the crypto community since the company disclosed in a regulatory filing on Wednesday that it had received a Wells Notice from the United States Securities and Exchange Commission.
The regulator has threatened to sue the exchange over its proposed Lend program, which would offer 4% interest on customer holdings of the USD Coin (USDC) stablecoin. Armstrong took to Twitter on Wednesday to vent his dismay over the lack of clarity from the regulator as to why it believes the product is a security. Meaival platforms Celsius and BlockFi offer similar products.
Speaking to Yahoo Finance on Wednesday, Celsius Network co-founder and CEO Alex Mashinsky said that everyone in the crypto industry was looking for clarity:
Mashinsky told Cointelegraph that Coinbase already provides yields on crypto assets such as Ether (ETH), so the SEC seems to have a particular issue with offering interest on USDC stablecoin deposits.
Celsius, which has more than $20 billion in assets under management, also pays yields on USDC and other stablecoins to non-accredited investors. However, Mashinsky said Celsius had pioneered the area, and its products “took a long time to perfect … it helps being the first to figure things out.”
When questioned about whether this means Celsius would be able to successfully navigate similar regulatory scrutiny to Coinbase, he replied:
Billionaire investor and Dallas Mavericks owner Mark Cuban took to Twitter on Wednesday, advising Armstrong and Coinbase to “go on the offensive” and labeling the move as “Regulation via Litigation.”
In a later tweet, he stated that by suing, the SEC “gets to play on their home court to regulate it,” adding that it could change how decentralized finance, or DeFi, works but also see it grow. Cuban urged Coinbase to be aggressive in its response to the threat of legal action for the greater good of the rest of the industry.
Economics author Frances Coppola explained she believes that under the law, if interest is charged or levied on token lending, then these “loan agreements” are considered securities.
Bloomberg took the view that SEC Chair Gary Gensler has just sent a warning shot to other crypto companies offering similar products in one of its most aggressive, recent moves against the industry.