Here's why Coinbase is in hot water over crypto lending -- and how the SEC is sending a shot across the bow for DeFi

MarketWatch2021-09-09

Coinbase Global finds itself in a dust-up with its top regulator over lending practices that the Securities and Exchange Commission says run afoul of existing securities rules. Brian Armstrong, the ...

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Comments

TraderJac
2021-09-09
TraderJac
Everything is still very grey
Ghuna
2021-09-09
Ghuna
Volatile but the trend
- TraderJac:
  Agree
NatYong
2021-09-09
NatYong
investors lend out digital coins to earn additional fee income.
- Hodl:
  [Grin]

Leave a comment

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When you start lending it out,\" Amy Lynch, a former SEC regulator and president of FrontLine Compliance, told MarketWatch in a phone interview Wednesday afternoon.\nCoinbase had planned to eventually expand its crypto lending program to other assets outside of USD Coin.\nLynch said she advises that companies that offer crypto lending services register with the SEC or go through a broker/dealer to comply with regulatory rules.\nFor example, Gemini partners with crypto lender Genesis, a subsidiary of Digital Currency Group. In that case, Gemini, owned by twins Cameron and Tyler Winklevoss, collects part of the spread between interest paid on the crypto and interest Genesis charges on its loans to institutions.\nLynch said Coinbase may not be eager to establish such an arrangement because it would mean sharing fees.\n\"If the SEC decided that this is an area of concern, they are going to start looking more closely at the firms that do this,\" she said.\nIndeed, The Wall Street Journal recently reported that the SEC sent letters to companies seeking information about crypto lending platforms. MarketWatch's sister publication reported that the regulator sought information, including on whether digital assets being offered are securities that should be registered.\nR.A. Farrokhnia, a professor at Columbia Business School, said Coinbase represents financial innovation and that regulation should not stifle the \"new new thing.\"\n\"What you are witnessing is the evolution of crypto, and specifically the next phase is decentralized finance,\" Farrokhnia said.\n\"Regrettably, despite crypto being in our financial ecosystem for the past several years, there hasn't been a clear-cut regulatory framework...indicating what's allowed and what isn't allowed,\" he said.\n\"So, this lack of regulatory clarity on what exactly is considered a security under the existing framework...[without the] creation of brand-new regulation, custom-made for our new reality, is causing all sorts of confusion,\" Farrokhnia said, explaining that he believes the SEC should express greater willingness to collaborate with the nascent crypto industry.\nGensler, who has trained the SEC's focus on investor protections -- perhaps more than any other regulator to date -- has openly said that he also aims to upgrade crypto rules.\n\"To the extent that something is a security, the SEC has a lot of authority. And a lot of crypto tokens -- I won't call them cryptocurrencies for this moment -- are indeed securities,\" Gensler told CNBC during an interview back in May.\n\"We need to update and freshen our rules to ensure that, while retail investors and any individual has First Amendment rights to speak and so forth, that they're not misleading the public, they're not manipulating the public, manipulating the markets,\" he said.\nLynch said the SEC's stance on Coinbase's lending may be influenced by a recent lawsuit against BitConnect, which offered its own digital security in 2016 in exchange for bitcoin and created an automated program that made money by trading the contributed bitcoin. Investors thought profits were being shared but the SEC alleges that the program was an elaborate Ponzi scheme.\nCoinbase shares on Wednesday finished down 3.2% and are down 7.3% for the week, compared with a weekly decline for the Dow Jones Industrial Average and the S&P 500 index of 0.5% and 1%, respectively.","kind":null,"is_publish_news":true,"is_publish_highlight":true,"is_publish_live":null,"is_publish_wemedia":null,"editions":null,"column":"","sentiment":"","news_tag":"","news_rank":0,"symbols":[],"gpt_button":1},"commentList":[{"id":883003406,"gmtCreate":1631185009505,"gmtModify":1676530490168,"author":{"id":"3577012660758299","authorId":"3577012660758299","name":"TraderJac","avatar":"https://static.tigerbbs.com/291c7ff3ca7266bca11f700fed643d49","vip":1,"crmLevel":2,"crmLevelSwitch":0},"htmlText":"Everything is still very grey","listText":"Everything is still very grey","text":"Everything is still very grey","images":[],"top":1,"highlighted":1,"essential":1,"paper":1,"likeSize":0,"commentSize":0,"repostSize":0,"link":"https://ttm.financial/post/883003406","repostId":2166397137,"repostType":2,"isVote":1,"likeStatus":false,"favoriteStatus":false,"reportStatus":false,"tweetType":1,"langContent":"EN"},{"id":889276836,"gmtCreate":1631154415625,"gmtModify":1676530481995,"author":{"id":"3583465977097611","authorId":"3583465977097611","name":"Ghuna","avatar":"https://static.tigerbbs.com/b2083449d33291e1e0e35b026e7cad96","vip":1,"crmLevel":4,"crmLevelSwitch":0},"htmlText":"Volatile but the trend","listText":"Volatile but the trend","text":"Volatile but the trend","images":[],"top":1,"highlighted":1,"essential":1,"paper":1,"likeSize":3,"commentSize":1,"repostSize":0,"link":"https://ttm.financial/post/889276836","repostId":2166397137,"repostType":2,"isVote":1,"likeStatus":false,"favoriteStatus":false,"reportStatus":false,"tweetType":1,"comments":[{"id":5805658,"gmtCreate":1631184994431,"gmtModify":1663233616336,"authorId":3577012660758299,"author":{"id":3577012660758299,"authorId":3577012660758299,"name":"TraderJac","avatar":"https://static.tigerbbs.com/291c7ff3ca7266bca11f700fed643d49","vip":1,"crmLevel":2,"crmLevelSwitch":0,"individualDisplayBadges":[]},"repliedAuthorId":0,"objectId":889276836,"type":1,"supId":0,"prevId":0,"content":"Agree","text":"Agree","html":"Agree"}],"langContent":"EN"},{"id":889273565,"gmtCreate":1631154258157,"gmtModify":1676530481930,"author":{"id":"3580207321438450","authorId":"3580207321438450","name":"NatYong","avatar":"https://static.tigerbbs.com/62b1fa39b2974271d1c06e208f7b3571","vip":1,"crmLevel":4,"crmLevelSwitch":0},"htmlText":"investors lend out digital coins to earn additional fee income.","listText":"investors lend out digital coins to earn additional fee income.","text":"investors lend out digital coins to earn additional fee income.","images":[],"top":1,"highlighted":1,"essential":1,"paper":1,"likeSize":3,"commentSize":1,"repostSize":0,"link":"https://ttm.financial/post/889273565","repostId":2166397137,"repostType":4,"isVote":1,"likeStatus":false,"favoriteStatus":false,"reportStatus":false,"tweetType":1,"comments":[{"id":5801164,"gmtCreate":1631154303252,"gmtModify":1663233593244,"authorId":3579666066637422,"author":{"id":3579666066637422,"authorId":3579666066637422,"name":"Hodl","avatar":"https://static.tigerbbs.com/d591a82f579d3114da9795812a4217a0","vip":1,"crmLevel":3,"crmLevelSwitch":0,"individualDisplayBadges":[]},"repliedAuthorId":0,"objectId":889273565,"type":1,"supId":0,"prevId":0,"content":"[Grin]","text":"[Grin]","html":"[Grin]"}],"langContent":"EN"}],"isCommentEnd":false,"newsSizeData":{"likeSize":37,"commentSize":3,"repostSize":0,"favoriteSize":0,"likeStatus":false,"favoriteStatus":false},"APP":{"userAgent":"Mozilla/5.0 AppleWebKit/537.36 (KHTML, like Gecko; compatible; ClaudeBot/1.0; +claudebot@anthropic.com)","isDev":false,"isTTM":true,"deviceId":"web-server-community-laohu8-v3","version":"4.24.2","shortVersion":"4.24.2","platform":"web","vendor":"web","appName":"ttm","isIOS":false,"isAndroid":false,"isTiger":false,"isTHS":false,"isWeiXin":false,"isWeiXinMini":false,"isWeiBo":false,"isQQ":false,"isBaiduSwan":false,"isBaiduBox":false,"isDingTalk":false,"isToutiao":false,"isOnePlus":false,"isHuaWei":false,"isXiaomi":false,"isXiaomiWebView":false,"isOppo":false,"isVivo":false,"isSamsung":false,"isMobile":false},"href":"/m/news/2166397137"}