Phoinike

Main Menu

  • Albania Real Estate
  • Albania Lending
  • Albania Credit
  • Albania Economy
  • Loans

Phoinike

Header Banner

Phoinike

  • Albania Real Estate
  • Albania Lending
  • Albania Credit
  • Albania Economy
  • Loans
Albania Lending
Home›Albania Lending›Does the SEC have a case against Coinbase?

Does the SEC have a case against Coinbase?

By Blake G. Keller
September 15, 2021
0
0


Coinbase (NASDAQ: COIN) has been planning to launch a loan product called Coinbase Lend for months. The company would take users’ cryptocurrency deposits and loan them to borrowers, securing their loans with other currencies such as Bitcoin. Depositors would earn interest on their holdings through the loans.

There is only a hiccup. Coinbase reported that the SEC had issued a Wells notice (an intention to sue) to the company regarding the Coinbase Lend program, alleging that the product constituted security and had to register as such.

Coinbase believes the SEC is far from the grassroots, and management has not been afraid to let the public know. Legal Director Paul Grewal posted a blog post and CEO Brian Armstrong went on a rampage over Twitter.

The fight has big potential ramifications for Coinbase, as well as crypto investors in general.

Image source: Getty Images.

Is Coinbase Lend a security?

In Grewal’s blog post, he says the SEC uses case law from SEC c. Hto have to and Dreams vs. Ernst & Young, but the SEC refuses to provide details on how they apply. I’m not a lawyer, but let’s dive into the business.

In the Howey In this case, an investment contract is defined as “a contract, transaction or scheme whereby a person invests his money in a joint venture and is made to expect profits only from the efforts of the promoter or a third party” .

From a layman’s perspective, Coinbase Lend certainly seems to fit the definition of an investment contract in the Howey Case. A person invests money in the Coinbase Lend program with the expectation of earning a return in the form of interest. The only way to earn that interest is for Coinbase to turn around and make money on that money by lending it to borrowers. These are solely the efforts of the promoter i.e. Coinbase.

The Dreams determined case that a ticket is a security based on four factors:

  1. The company sold the notes to raise capital and the buyers bought them for a profit in the form of interest.
  2. The tickets were offered and sold to a large segment of the public.
  3. The public reasonably perceived from the advertisements for the tickets that they were investments.
  4. There was no risk reduction factor that would make securities law enforcement unnecessary (like FDIC deposit insurance).

It can also be argued that it meets the definition of Dreams Case:

  1. Coinbase is raising capital to lend to others, and buyers expect to profit from the interest payments.
  2. Coinbase offers the product to everyone.
  3. It is seen as an investment.
  4. Check the Coinbase Lend disclosure: “Coinbase is not a bank. Your loaned crypto is not protected by FDIC or SIPC insurance.”

Again, I’m not a lawyer, but the SEC case looks pretty compelling.

The defense of Coinbase

Coinbase would like to point out that it is not the only player in the city when it comes to crypto lending. “Other crypto companies have had lending products on the market for years, and new lending products continue to be launched over the past month,” Grewal wrote in his blog post.

“If you don’t want this activity, just post your position, in writing, and apply it consistently across the industry,” Armstrong called the SEC on Twitter.

While Armstrong has argued that there are no official SEC guidelines, the defense is shaky at best. The idea that something shouldn’t be illegal just because other people have gotten away with it so far and there is no clear guideline is not a defense.

In addition, competing products have not been able to completely escape the law. BlockFi, for example, has been targeted by three states – New Jersey, Alabama and Texas – alleging that the crypto lending platform violates state securities laws.

What this means for investors

If Coinbase goes ahead with Lend and the SEC goes ahead with legal action, it could set a precedent that would prevent many other loan programs from working in the United States.

The reach of the SEC could even prevent decentralized finance (DeFi) protocols like Aave (CRYPTO: AAVE) and Compound (CRYPTO: COMP) to work. These companies’ tokens responded in kind after Coinbase announced the Wells opinion from the SEC – the price of each fell sharply. However, DeFi protocols can be exempt from SEC oversight if they are decentralized enough, leading to another line of legal defense for Aave, Compound, and others.

The ability to take out secured loans is an essential part of DeFi and cryptocurrency investing. Crypto investors should pay close attention to the dispute as the ramifications could go far beyond Coinbase’s lending product.

10 stocks we prefer over Coinbase Global, Inc.
When our award-winning team of analysts have stock advice, it can pay off to listen. After all, the newsletter they’ve been running for over a decade, Motley Fool Equity Advisor, has tripled the market. *

They just revealed what they think are the top ten stocks investors can buy right now … and Coinbase Global, Inc. was not one of them! That’s right – they think these 10 stocks are even better buys.

See the 10 actions

* The portfolio advisor returns on August 9, 2021

Adam Levy owns shares of Bitcoin. The Motley Fool owns shares and recommends Bitcoin and Twitter. The Motley Fool has a disclosure policy.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.


Related posts:

  1. Trevor Lawrence will receive a signing bonus in Crypto; Mobile wallet use soars
  2. Pandemic, Online Shopping May Lower Clothing Prices This Eid
  3. Oil prices slide from six-week high as concerns over India’s demand weigh
  4. Poverty in Myanmar could double after chaos of coup, UN report says
Tagsunited states

Recent Posts

  • Roma end 60-year wait as Zaniolo seal Europa Conference League crown | Europa Conference League
  • Zahid: Giving a cash advance of RM1.3m to the police football club is in line with the charity’s aims to help the needy; it’s not CBT
  • Overlapping crises in the Western Balkans
  • Tottenham in £25m bid for Frankfurt star seen as huge upgrade for Conte; Arsenal turn to rivals striker amid Gabriel Jesus frustration
  • Charlotte businessman ran a $7 million Ponzi scheme, SEC says

Archives

  • May 2022
  • April 2022
  • March 2022
  • February 2022
  • January 2022
  • December 2021
  • November 2021
  • October 2021
  • September 2021
  • August 2021
  • July 2021
  • June 2021
  • May 2021
  • April 2021
  • March 2021
  • January 2021
  • December 2020
  • November 2020

Categories

  • Albania Credit
  • Albania Economy
  • Albania Lending
  • Albania Real Estate
  • Loans
  • Terms and Conditions
  • Privacy Policy