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The CEO of Celsius is similarly looking for clarification for similar products, while Mark Cuban suggests going on the offensive.
Since the business reported in a regulatory filing on Wednesday that it had received a Wells Notice from the United States Securities and Exchange Commission, support for Coinbase and its CEO, Brian Armstrong, has been flooding in from the crypto community.
The exchange has been faced with a lawsuit over its proposed Lend programme, which would give 4% interest on customer holdings of the USD Coin (USDC) stablecoin. Armstrong took to Twitter on Wednesday to express his displeasure with the regulator’s lack of clarity about why it believes the product is a security. Meaival platforms Celsius and BlockFi provide comparable services.
Celsius Network co-founder and CEO Alex Mashinsky told Yahoo Finance on Wednesday that everyone in the cryptocurrency business was waiting for clarity:
“I think we’re going through these murky waters right now and we need to get clarity and its going to take a little bit of time before we get the rules and we can start running faster.”
According to Mashinsky, Coinbase already offers yields on crypto assets such as Ether (ETH), thus the SEC appears to have a problem with giving interest on USDC stablecoin deposits.
“The SEC claims yield on USDC may be a security if paid to non-accredited investors. Coinbase did not ask permission for all assets only for USDC.”
Celsius, which manages more than $20 billion in assets, also offers non-accredited investors yields on USDC and other stablecoins. Mashinsky, on the other hand, claimed that Celsius had pioneered the field and that its goods “took a long time to develop… it helps to be the first to figure things out.”
When asked if this means Celsius will be able to effectively navigate similar regulatory scrutiny as Coinbase, he responded:
“Everyone has to wait and see what the SEC will issue as regulation. Looks like Coinbase wants to take the SEC to court like XRP and prove they went beyond their charter.”
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.”
1/ Some really sketchy behavior coming out of the SEC recently.
— Brian Armstrong (@brian_armstrong) September 8, 2021
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.
“It’s better for the industry that they take on the SEC rather than the SEC go after a small decentralized entity and get a quick judgment that becomes the law of the land for DeFi.”
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.
Really very simple, Brian. You can lend out your tokens for free, and other people can lend out your tokens for free. But if you, or they, charge interest on lending tokens, or profit in any other way from lending tokens, they are securities. https://t.co/kTMxNwmMkB
— (((Frances ‘Cassandra’ Coppola))) 🌷🌷🌷 (@Frances_Coppola) September 8, 2021
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.