SEC Threatens to Sue Coinbase

PLUS: BlackRock taps Axoni's Veris blockchain, $COIN drops and more |

The biggest crypto news and ideas of the day  Sept. 8, 2021 Sponsored by     Welcome to The Node.   If you were forwarded this newsletter and would like to receive it, sign up here.   Questions? Feedback? We'd love to hear from you! Simply reply to this email.   –Daniel Kuhn Today's must-reads Top Shelf SEC SHOCKS: Coinbase said the SEC has threatened to sue over the crypto exchange's yet-to-be-launched "Lend," a lending program for "verified borrowers" that offers 4% annualized yields. In a blog post, the company said the federal regulatory won't provide an explanation over how or why the program might fall afoul of securities law. Coinbase's stock ($COIN) slid 4.1% on Nasdaq to $256 ahead of press time. LARGEST ASSET MANAGER: BlackRock will use Axoni's Veris blockchain to manage equity swap trades, said a statement by Axoni, joining Citi and Goldman Sachs, among others, on the network. Using Veris, parties can match and confirm trade terms upfront, and match and reconcile post-trade data after a stock swap. MINING BTC: Oslo-based Arcane Crypto, known mostly for its regulated securities products, ordered its first batch of Antminers to start mining crypto this quarter.  Company CEO Torbjørn Bull Jenssen expects the batch to bring in around SEK 3.5 million ($407,000) of revenue per month, he said in the statement. VENTURE FUN: Crypto-focused private equity firm 10T has raised $750 million from a mix of public pension plans, endowments, foundations and family offices investing in mid-to-late-stage companies in the digital asset ecosystem. 10T, led by CEO and managing partner Dan Tapiero, has closed its inaugural growth equity funds – 10T Fund and 10T DAE Expansion Fund – with nearly $389 million in capital commitments. A message from Nexo When it comes to buying, borrowing or earning on your crypto, you won't find an easier, safer way to do it than Nexo.   And right now, with its Referral Program you can earn $10 worth of bitcoin for each friend you refer. And the best part – your referral gets $10 in BTC, too.   You can invite up to 100 friends – so you can get as much as $1,000 in bitcoin by copy-pasting a few links. And you can further bump that amount by earning up to 8% interest p.a. on your bitcoin, paid out daily.   Now is the time to unlock the full power of your crypto.   Join Nexo and start earning free BTC with your friends. Overheard on CoinDesk TV... Sound Bites "We have constant dialogue and we're continuously evaluating all new ideas in partnership with them to get clarity not just for Coinbase but for the industry to innovate and thrive."   –Coinbase VP for Products Sanchan Saxena, on recent warnings by the SEC, on CoinDesk TV's "First Mover." What others are writing... Off-Chain Signals El Salvador Forced Through Its Bitcoin Law by Any Means Necessary (Scott Chipolina/Decrypt) Controversial Bitcoin Mining Facility Applies for Fresh New York License (Scott Chipolina/Decrypt) OpenSea bug destroys $100,000 worth of NFTs, including historical ENS name (Tim Copeland/The Block) Bitmain to host 56,000 bitcoin miners in Georgia State via joint mining deal (Wolfie Zhao/The Block) El Salvador's Chivo bitcoin wallet struggles to reach liftoff on launch day (Aislinn Keely/The Block) The disastrous voyage of Satoshi, the world's first cryptocurrency cruise ship (Sophie Elmhirst/The Guardian) Introducing Crypto for Advisors, a weekly newsletter built specifically for financial advisors (FAs) and registered investment advisors (RIAs) who seek to incorporate this rapidly moving asset class into their work. Subscribe today. Sponsored Content   Unique.One: Using NFT marketplaces for philanthropy   Many different potential use cases for non-fungible tokens (NFTs) have come to light in the last few years, including art, gaming, luxury ownership and collectibles. UniqueOne.Network (UON) has been exploring that since the launch of its marketplace Unique.One, which was created to give economic alternatives to artists around the world who have been affected by COVID-19 lockdowns.   Putting the news in perspective The Takeaway Does Gensler Want Dialogue or Just a Monologue?  Coinbase, the largest U.S. cryptocurrency exchange and one of the largest publicly traded cryptocurrency firms in the world, announced late Tuesday night that it has received a warning from the Securities and Exchange about its planned Lend product, which would give users 4% interest on deposits of the stablecoin USDC, with other assets apparently to be added later. According to Coinbase, the U.S. regulatory agency last Wednesday sent the firm what's known as a Wells notice, a warning of a planned lawsuit over the product. (Disclosure: Coinbase's parent company, Digital Currency Group, is an investor in Circle, which issues USDC). But, according to Coinbase, the warning, which will likely block the launch of the Lend product, was issued after months of borderline stonewalling by the regulator. According to Coinbase CEO Brian Armstrong, the stonewalling extended back to at least May, when he visited Washington, D.C., to meet with various lawmakers and regulators. "The SEC was the only regulator that refused to meet with me, saying 'we're not meeting with any crypto companies,'" Armstrong wrote in a Twitter thread last night. According to a blog post from Coinbase, the company presented the Lend product to the SEC and engaged in a long disclosure process before last week's warning. Despite that effort at transparency, Armstrong says the SEC did not respond with any advice on how to properly structure the product ahead of issuing its Wells warning.   "We're being threatened with legal action before a single bit of actual guidance has been given to the industry on these products," Armstrong wrote. Coinbase argues, plausibly, that Lend is not a security, because its returns are not tied to the company's financial performance. Equally frustrating for the now-public startup is that similar products are widespread in the cryptosphere, offered by effectively unregulated entities including exchanges and DeFi protocols. Other U.S.-regulated crypto companies have responded with empathy and frustration. "U.S. regulators are beating down good actors because it's convenient," wrote Jesse Powell, CEO of the Kraken crypto exchange. "Meanwhile, actual scams run unabated for years." Armstrong also questioned whether the SEC is really doing its job. "Who are they protecting here and where is the harm? People seem pretty happy to be earning yield on these various products, across lots of other crypto companies … Shutting these down would arguably be harming consumers more than protecting them." Read the full column here.   –David Z. Morris The Chaser... The Node A newsletter from CoinDesk See Previous Editions Copyright © 2021 CoinDesk, All rights reserved.  250 Park Avenue South New York, NY 10003, USA You can manage your preferences here or unsubscribe from all CoinDesk email.