The U.S. Securities and Exchange Commission notifies virtual currency exchange Coinbase of a lawsuit notice, and Coinbase is confused as ``I don't know the reason''

On September 8, 2021, Brian Armstrong, CEO of Coinbase, a major virtual currency exchange, announced that he received a ``

Wells Notice '' from the U.S. Securities and Exchange Commission (SEC). Ta. The SEC has cited problems with Coinbase's unreleased lending product Lend , but Armstrong counters that he doesn't know why.

The SEC has told us it wants to sue us over Lend. We don't know why. | by Coinbase | Sep, 2021 | The Coinbase Blog

Lend, provided by Coinbase, is a financial product that promises an annual interest rate of 4% by depositing USD coin, a virtual currency backed by the US dollar, from investors. Regarding Lend, Mr. Armstrong explained, ``It is a program where customers lend USD coins to investors, and there is also a principal guarantee and interest payment obligation,'' and is looking for pre-registrations for release in October 2021. I was in the middle of doing that.

The SEC took issue with this product and told Coinbase that ``Lend is a security.'' They sent out Wells notices demanding records and testimony from employees, and indicated that they were willing to sue if they sold Lend.

Mr. Armstrong responded, ``Why is a lending program considered a security?'' ``We have been actively consulting with the SEC regarding Lend for six months and have continued to provide the necessary information.'' 'However, we have not received a clear response from the SEC. The SEC has not explained what the problem is,' he said, again asking the SEC for a clear response.

Regarding the SEC, Armstrong said, ``The SEC's goal is to protect investors and create a fair market. But who is harmed in this case, and what harm?'' They are content to profit from their products, and SEC regulation will do more harm than protection.'

Armstrong added, ``Various cryptocurrency exchanges have been offering similar products for years, but ours is somehow being rejected.'' ``We are committed to following the law,'' Armstrong said. 'If the SEC publishes guidance, we can follow it,' he said, calling for dialogue with the SEC.

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