Coinbase (NASDAQ: COIN) shares fell premarket on Wednesday after the U.S. Securities and Exchange Commission (SEC) threatened to sue the crypto exchange.
The firm planned to launch a program allowing users to earn interest by lending crypto assets.
Programmes lending crypto assets in return for interest have become increasingly common, but regulators have growing concerns about the idea, especially in the U.S., arguing that such products must comply with existing security laws.
Chief Legal Officer of Coinbase, Paul Grewal, confirmed the SEC issued a Wells notice last Wednesday over its plans to launch the product, named Coinbase Lend. He further stated that Coinbase would delay the launch of its program until at least October due to the SEC's plans to sue the company.
Brian Armstrong, Co-founder and CEO of Coinbase provided his thoughts via Twitter:
1/ Some really sketchy behavior coming out of the SEC recently.
Story time…— Brian Armstrong – barmstrong.eth (@brian_armstrong) September 8, 2021
Grewal stated that the SEC's concerns regarding Coibase's Lend involved the regulator believing the product is a security. Coinbase denied this, saying that “Coinbase's Lend program doesn't qualify as a security — or to use more specific legal terms, it's not an investment contract or a note.”
Coinbase Shares fell 3.77% to $256.74 following the news.
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