Coinbase should move from defense to attack in its new conflict with the US Securities and Exchange Commission (SEC). This is the opinion of the American billionaire and owner of the Dallas Mavericks basketball team, Mark Cuban.
We will remind, on the eve of the news that the SEC may sue Coinbase because of its Lend platform, designed to make money on deposits of stablecoins, that is, cryptocurrencies pegged to the value of the dollar. Let’s talk about what is happening in more detail.
Recall that representatives of the crypto exchange recently shared the details of the new problem. Coinbase CEO Brian Armstrong said on Twitter that the US Securities and Exchange Commission has announced its desire to sue the trading platform. The reason for this was the Lend program, which allows users to earn up to 4 percent per annum on investments in digital assets.
This is significantly more than local banks – and this clearly does not suit the representatives of the regulator. At the same time, the officials did not name the exact reasons for the claim. Thus, their claims in fact look like direct pressure and threats.
Mark Cuban believes that in this case, Coinbase needs to go all the way.
Securities and Exchange Commission case v Coinbase
The billionaire believes that threats from the financial regulator are unforgivable, so Coinbase must move to a new strategy in its relationship with the Securities and Exchange Commission. Cuban said this in response to a tweet from the CEO of the exchange, Brian Armstrong, in which he spoke about the essence of what is happening.
Here is a quote from a billionaire in which he shares his vision of the situation.
Brian, this is «regulation through litigation.» The Commission cannot figure it out on its own and are afraid to make mistakes. The SEC shifts all the problems onto the shoulders of lawyers. These are the people who shouldn’t be influenced by new technologies. You should move on to more active action.
That is, Mark clearly made it clear that the platform should defend its interests, and not just cover up a working service because of the possible threat of a lawsuit. Such a tactic would be wrong, Cuban said. And here you need to act differently.
Reporters for the news outlet Decrypt later reached out to Cuban for an explanation of what the exchange was supposed to do. However, the billionaire has not laid out any specific plans – he believes that the leadership of Coinbase can develop them on their own.
The representatives of the trading platform themselves have repeatedly stated that Coinbase prefers to cooperate with the financial regulator. Earlier, the exchange had been trying for several months in a row to find a consensus with the SEC on issues regarding Lend.
The Lend service should allow Coinbase users to earn at least 4 percent per annum on their USDC stablecoin deposits. The exchange also announced the possibility of expanding the list of coins compatible with the platform. However, she is not a pioneer in this matter: companies such as BlockFi and Celsius already offer their clients passive income for investments in different cryptocurrencies.
But the fact that the service already exists does not yet make it completely legal in the eyes of regulatory authorities. However, the SEC refuses to work with Coinbase to clarify the requirements for such products, as previously stated by the exchange’s director of legal affairs Paul Greval.
Official guidance from the US Securities and Exchange Commission on how they intend to apply the Howie test to Lend-like products would be of great help in responsibly regulating our industry. Instead, the Securities and Exchange Commission would rather skip these basic measures and go straight to litigation.
The Howie Test is a special mechanism developed by the US Supreme Court that determines whether the financial transactions under investigation constitute an «investment contract. » If the test is positive, the qualifying products are subject to the requirements of the US Securities Act of 1933. As you can see, the SEC plans to skip this stage and not give Coinbase an actual guide to further work, simply by throwing subpoenas to the exchange.
What is the essence of such tactics? It seems that in a similar way, the Commission is simply using its powers to create unnecessary pressure on the crypto industry. Following the recent Bitcoin crash below $ 50,000, a flood of negative news could affect digital asset prices. That is, representatives of the traditional system still do not want to witness the rapid development of the cryptosphere, which will most likely prove to be a serious competitor for the banking system in general and the dollar in particular.
We believe that the company should indeed act aggressively in its dialogue with the Commission. If SEC representatives do not want to clarify the essence of their claims, such actions are simply pressure – and on the entire digital asset industry. This means that Coinbase has the opportunity to defend the interests of the latter and launch a new stage in the popularization of cryptocurrencies.