Coinbase, a popular crypto exchange, has been trying to remain on the right side of the law. Before it releases a product in the US, they discuss with regulatory bodies to ascertain the legality of their action. This was noted by Brian Armstrong, CEO of Binance, in a thread of tweets that he released recently.
According to Armstrong, he was surprised when he found out that Coinbase could be slammed with a lawsuit if it releases its recent yield lending product to the public.
In his long tweet, he stated that the U.S. Securities and Exchange Commission was threatening to sue if it was released.
“1/ Some really sketchy behavior coming out of the SEC recently. Storytime…”
Yield farming is not a new feature in crypto exchanges because many others have been offering this service for years. Coinbase decided that it wanted to release its version soon, and decided to ask the SEC about the guidelines concerning it.
In his tweet, Armstrong stated, “3/ A bunch of great companies in crypto have been offering versions of this for years. Coinbase came out recently and said we would be launching our own version.”
Armstrong went on to explain that Coinbase was surprised when SEC replied that lending is a security and they didn’t have to right to release the feature in the US. Coinbase retorted by requesting for an explanation into this, and instead of getting an explanation, according to Armstrong, this happened:
“6/ 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.”
Coinbase, through its actions, is actively involved in following the laws and guidelines but has added that there is the need for clarifications concerning unclear guidelines. Armstrong has argued that it is unfair in the law to allow others to have that feature but ban Coinbase from offering it.
“13/ Shutting these down would arguably be harming consumers more than protecting them, and by preventing Coinbase from launching the same thing that other companies already have life, they’re creating an unfair market.”
Armstrong has noted that Coinbase doesn’t mind meeting SEC in court, but they would prefer if SEC could clarify the issue outside the court.
“20/ If we end up in court we may finally get the regulatory clarity the SEC refuses to provide. But regulation by litigation should be the last resort for the SEC, not the first.”
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