American billionaire Mark Cuban has urged Coinbase to ‘go on the offensive against the US market watchdog after it threatened the cryptocurrency exchange with a legal suit if it goes ahead with plans to launch a programme allowing users to earn interest by lending crypto assets.
“Brian, this is "Regulation via Litigation". They aren't capable of working through this themselves and are afraid of making mistakes in doing so. They (sic) leave it to the lawyers. Just the people you don't want impacting the new technologies. You have to go on the offensive,” Cuban said in a tweet in response to Coinbase founder and CEO Brian Armstrong.
The Securities and Exchange Commission (SEC) has issued Coinbase with a Wells notice, an official way it tells a company that it intends to sue the company in court, Paul Grewal, the company's chief legal officer said in a blog post. He said Coinbase would delay the launch of its 'Lend' product until at least October as a result.
Programmes that allow owners of cryptocurrencies to lend these in return for interest are becoming more common around the world, but some regulators, particularly in the United States have started to raise concerns, arguing that such products should comply with existing securities laws.
The US state of New Jersey ordered the cryptocurrency platform BlockFi Inc in July to stop offering interest-bearing accounts that have raised $14.7 billion from investors.
Armstrong, in a series of tweets, described SEC’s behavior towards the company as “sketchy” and said that the market regulator refused to give reasons and instead threatened to sue. “They responded by telling us this lend feature is security. Ok - seems strange, how can lending be security? So we ask the SEC to help us understand and share their view. We always make an effort to work proactively with regulators, and keep an open mind,” Armstrong said.
“They refuse to tell us why they think it's a security, and instead subpoena a bunch of records from us (we comply), demand testimony from our employees (we comply), and then tell us they will be suing us if we proceed to launch, with zero explanation as to why,” he added.
He also noted that he met “with every regulator and branch of government” after the company became the first cryptocurrency company to go public in the US. However, he alleged that the SEC refused to meet with him saying “we're not meeting with any crypto companies".
He further said that the SEC, instead of publishing guidance and enforcing is across the industry, is indulging in “intimidation tactics behind closed doors.” “Whatever their theory is here, it feels like a reach/land grab vs other regulators,” he stated.
[Input from Reuters]
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