U.S. regulators have released the latest signal that regulation in the cryptocurrency sector will not be soft.
On Tuesday night, Eastern Time, Coinbase, the largest cryptocurrency exchange in the United States, disclosed that it received a notice from the U.S. Securities and Exchange Commission (SEC) on Wednesday that the SEC intended to sue the company for planning to launch a product Coinbase Lend, and to the surprise of the division, the SEC did not disclose the reason for the threat of prosecution.
Coinbase wants to allow qualified Coinbase Lend users to earn interest by offering loans on some of the cryptocurrency assets held on the Conibase platform, with the first stablecoin USDC loan to be launched with an annualized yield of 4%. The principal of customers participating in the lending is safe.
Coinbase said it informed the SEC of the details of the plans for the above products, and in the first meeting between the two sides, Coinbase answered all the SEC's written questions and again in personal meetings, but did not get much response from the SEC. The SEC said it thought the product would evolve into a security, but did not explain why or how to reach that conclusion. In June, the SEC launched a formal investigation without providing any explanation.
Coinbase said it won't be able to launch Coinbase Lend until at least October. Last week's notice was reluctant to even go through basic regulatory steps and take legal action directly. From this point of view, either the company will have to postpone the launch of new products indefinitely without knowing why, or it will be sued. While the SEC gave Coinbase the opportunity to submit a written defense, the company's defense of the new product was futile because it did not understand the reasons for the SEC's actions.
SEC officials declined to comment on a possible prosecution of Coinbase. Some media commentators believe that the SEC's enforcement actions have sent regulatory signals to the entire cryptocurrency industry.
Some former SEC officials pointed out that the SEC usually waits for companies to launch investment products before announcing possible sanctions, and this action against Coinbase has shocked them. This suggests that the SEC has found strong ways to block its advanced cryptocurrency products, which it fears poses risk to consumers.
James Cox, a professor at Duke Law School, said it was the first time in a long time that the SEC had been so radical. The SEC has been threatening cryptocurrencies many times before, and it is a fast-growing market that is fertile ground for abuse.
It is worth mentioning that Gary Gensler, the chairman of the SEC who officially took office in April this year, is a former Goldman Sachs partner who understands finance and has taught courses on digital assets at MIT, a background that is very different from most U.S. government officials who have limited knowledge of the cryptocurrency market.
In fact, the trend of the SEC increasing regulation since Gensler took office is clear. As mentioned in a previous article, Gensler said when he was just nominated as chairman of the SEC that the SEC must root out fraud in the cryptocurrency market.
Gensler said at the time that cryptocurrencies are "catalysts for change." Bitcoin and cryptocurrencies have brought new ideas for payments and financial inclusion, but have also raised concerns about investor protection. If confirmed by the SEC, he will work to promote innovation while also ensuring protection for investors.
In May, Gensler hinted at a congressional hearing that today's hot cryptocurrencies and SPAC will face tougher regulation in the Biden era, and he looks forward to working with other regulators and Congress to fill the gap in the cryptocurrency market in the area of investor protection.
In July, Gensler referred to the cryptocurrency industry as "the wild land of our financial system" and "urgently needed" regulations. The SEC will step up efforts to hold companies accountable for products they may involve securities, including decentralized financing platforms.
This article is from Wall Street Insights, welcome to download the APP to see more