Coinbase’s Lend offering — an interest-generating service that somewhat resembles accounts traditionally offered by banks — could violate securities laws, the Securities and Exchange Commission said.
Coinbase, the largest cryptocurrency exchange in the United States, said on Wednesday that federal securities regulators were threatening to sue it over a proposed financial product that would let customers earn interest on digital asset deposits. The company, in a regulatory filing, said the Securities and Exchange Commission notified it on Sept.1 that its Lend product could violate securities laws. Regulators, the company said, might respond to Lend’s release by seeking a civil injunction. The issue raised by Lend — an interest-generating service that somewhat resembles accounts traditionally offered by banks — is whether it will be engaged in trading or offering products to consumers that are considered securities, which the S.E.C. has the power to regulate. The warning to Coinbase, which listed on the public market in April, is an indication that the S.E.C. is closely watching cryptocurrency companies — especially as they move into the territory of heavily regulated industries, such as banking.
