Brian Armstrong responds to SEC threats to shut down Coinbase yield product

Brian Armstrong responds to SEC threats to shut down Coinbase yield product

Crypto exchange Coinbase CEO Brian Armstrong responded Tuesday evening to planned enforcement by the U.S. Securities and Exchange Commission pertaining to the firm’s recently launched yield-generating product.

The firm, which went public on the Nasdaq stock exchange in April, received a subpoena by the SEC less than three months after it brought to market a product that allows users to earn double-digit yields on deposits of USDC on its platform. That's a much juicer yield than what is offered by consumer banks, which provide less than a basis point for savings accounts.

A person familiar with Coinbase's operation said that the exchange contacted the SEC about its yield product but received no guidance on its compliance with existing laws.

In a tweet, Coinbase CEO Brian Armstrong said:

"They refuse to tell us why they think it's a security, and instead subpoena a bunch of records from us (we comply), demand testimony from our employees (we comply), and then tell us they will be suing us if we proceed to launch, with zero explanation as to why."

The former Airbnb engineer added:

"They refuse to tell us why they think it's a security, and instead subpoena a bunch of records from us (we comply), demand testimony from our employees (we comply), and then tell us they will be suing us if we proceed to launch, with zero explanation as to why."

According to Armstrong, the SEC "refused" to meet with the chief executive during a visit to DC earlier this year.

"The SEC was the only regulator that refused to meet with me, saying 'we're not meeting with any crypto companies,'" Armstrong wrote. "This was right after we became the first crypto company to go public in the U.S."

BlockFi, a crypto financial services provider, has also been under fire for a similar product, which offers users a high-yield when they park stablecoin with the company. Five states have said that the firm has violated securities regulations and laws.

In addition to offering a yield on USDC held by the company, Coinbase offers other yield generating services via proof-of-stake protocols like Ethereum 2.0 and Tezos. A source said the SEC's action does not apply to staking.

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