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The SEC has told us it wants to sue us over Lend. We don’t know why

blog.coinbase.com

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Re: The SEC has told us it wants to sue us over Lend. We don’t know why

#231

Post by hoogabooga5 »

seibelj wrote: post #95
peterbonney wrote: post #92

Earlier quoted context omitted.

They repeatedly refer to lengthy sets of questions they received from the SEC, both in person and in writing. If you don’t think that is the SEC communicating their “rationale” for a decision and offering insight into what acceptable alternatives might look like then you obviously haven’t dealt with the SEC, nor do you understand what it is that they do. (I actually do have some relevant experience here - I was a par…

> Despite Coinbase keeping Lend off the market and providing detailed information, the SEC still won’t explain why they see a problem. Rather they have now told us that if we launch Lend they intend to sue. Yet again, we asked if the SEC would share their reasoning with us, and yet again they refused. Plain as day! And as to experience, I was CTO of the first company to settle with the SEC for an ICO: https://www.sec…

Why do people constantly cite legal fees to make a point or pour a foundation for another argument? That’s not the first time I’ve read a statement like that and it’s just a baffling thing to say. I’ve never heard “I’ve paid a lot of doctors so you should hear me out on ...”, oh, wait, yes I have.

“My attorney will be in touch,” too, like, you want to generate billable time for yourself to effectuate a threat to threaten me? Never understood it. Cool?

Re: The SEC has told us it wants to sue us over Lend. We don’t know why

#232

Post by dsr_ »

Reason077 wrote: post #217
bjackman wrote: post #194

Earlier quoted context omitted.

I'm not an expert here but I read their argument as they don't expect this lending to be regulated as "investment" because the capital is not in theory at risk. So it's more like a savings account than an investment account. That's the impression I got from the article, but reading other comments in the thread it doesn't seem like that's an at all relevant definition of the term!

> "capital is not in theory at risk. So it's more like a savings account than an investment account." But I guess if you want to offer a "savings account" then you need to be a licensed bank and meet all the requirements and regulations that come with that?

One of those requirements being that you participate in the FDIC/NCUA insurance system, so that end-users really don't have any risk up to the maximum insurable amount per account.

Re: The SEC has told us it wants to sue us over Lend. We don’t know why

#233

Post by contravariant »

bjackman wrote: post #194
dustintrex wrote: post #71

Earlier quoted context omitted.

Agreed, and this line pretty much sums it up: > Customers won’t be “investing” in the program, but rather lending the USDC they hold on Coinbase’s platform in connection with their existing relationship. "Give me money for a fixed period of time and I'll pay a guaranteed return on your principal. No, it's not an "investment", you're just lending it in connection with our existing relationship!"

I'm not an expert here but I read their argument as they don't expect this lending to be regulated as "investment" because the capital is not in theory at risk. So it's more like a savings account than an investment account. That's the impression I got from the article, but reading other comments in the thread it doesn't seem like that's an at all relevant definition of the term!

If you lose your money when the company goes bankrupt then that sounds like it's "at risk" to me. If not, any investment at all would be considered to not be "at risk".

Re: The SEC has told us it wants to sue us over Lend. We don’t know why

#234

Post by madamelic »

arcticbull wrote: post #44
bpodgursky wrote: post #29

Earlier quoted context omitted.

Brian's concern in the tweet thread is that a lot of other companies are already providing lending services without SEC action, putting Coinbase at a disadvantage. The rule should be applied across the industry in a standard manner, no matter which direction the SEC rules, and it is apparently not being applied consistently currently.

"But mom everyone else is doing crime, why cant I do crime? Not doing crime puts me at a major disadvantage with respect to my criminal peers." - Brian Armstrong, TLDR

I don't think the argument is that. It's that Coinbase asked if they could, SEC said "no, I'll sue you" and Coinbase is like "WTF dude, all these other platforms aren't being sued for doing exactly this."

Coinbase may not have known the SEC's opinion on this before they started talking to the SEC since it seemed like the SEC was ok with it happening elsewhere.

Re: The SEC has told us it wants to sue us over Lend. We don’t know why

#235

Post by madamelic »

fogof wrote: post #42

> They have only told us that they are assessing our Lend product through the prism of decades-old Supreme Court cases called Howey and Reves ... These two cases are from 1946 and 1990. Trying to make out like Howey is some obscure precedent from decades ago which the SEC is nitpicking over. The Howey test is the test applied to determine if something is an investment contract.

I am going to guess the article is PR to Coinbase going ahead with plans and getting sued, in the hopes they set a new precedent. I am cautiously hopeful for cryptocurrency in general, but this genuinely seems like it would be an easy lay up for the SEC.

Re: The SEC has told us it wants to sue us over Lend. We don’t know why

#236

Post by School-Cotton »

thaumasiotes wrote: post #190
mthoms wrote: post #175

Earlier quoted context omitted.

Excuse my ignorance but how is that any different from "interest"?

I'm guessing the concept is more like stock lending fees. You short a stock by borrowing shares and selling the borrowed shares. You'd short USDC the same way, if you could borrow them. The thing is that this really isn't an investment. An investment looks like this: - You ask me for funding for a project. I give you funding, in cash or in kind, and I get (partial) ownership of the project. If it does OK, I get some…

> You ask me for funding for a project. I give you funding, in cash or in kind, and I get (partial) ownership of the project. If it does OK, I get some money. If it does better than that, I get more money. If it does badly, I don't get much money.

That’s venture capitalism which is just one of the many different types of investing. Buying pianos in order to lend them out is another type of investing.

Re: The SEC has told us it wants to sue us over Lend. We don’t know why

#237

Post by harry8 »

arcticbull wrote: post #125
harry8 wrote: post #121

Earlier quoted context omitted.

yeah sure. Or you know the SEC is allowed to announce /why/ they are prosecuting. And why they are prosecuting a particular alleged transgressor first as opposed to some other having not done so until now. Seems like a reasonable thing to do to me? Generally ".. a written determination you're in the clear" is the opposite to how law is kind of meant to work. I haven't got a written determination that I'm not infringi…

> Or you know the SEC is allowed to announce /why/ they are prosecuting. They are, but they don't have to since the law is spelled out. > And why they are prosecuting a particular alleged transgressor first as opposed to some other having not done so until now. Gotta start somewhere, and the fact someone else is breaking the law isn't a defense. If it was any two people doing the same crime couldn't ever be charged r…

Stealth edit on the grandparent of this comment. Why do that? It make me go from the assumption of good faith to the other thing.

Re: The SEC has told us it wants to sue us over Lend. We don’t know why

#238

Post by JumpCrisscross »

jrochkind1 wrote: post #3

Seems to be gone from the internet. Can't find it in archive.today or archive.org either. reddit comment thread: https://www.reddit.com/r/CryptoCurrency/comments/pk2rjl/coin... Which points to a tweet thread from Brian Armstrong of Coinbase that is still there for now.... https://twitter.com/brian_armstrong/status/14354409980546539... unrolled (and probably will still be there even if tweets deleted?) https://threadr…

> Seems to be gone from the internet

It was a PR post written to rile a user base without knowledge of the financial system or securities law.

Unfortunately, it made it into regulatory and political channels and is backfiring massively. (If the general counsel and CEO of a $70bn exchange pretend to be this clueless, there are almost certainly deeper problems at the company.)

Re: The SEC has told us it wants to sue us over Lend. We don’t know why

#239

Post by Paradigma11 »

paulgb wrote: post #223
Reason077 wrote: post #217

Earlier quoted context omitted.

> "capital is not in theory at risk. So it's more like a savings account than an investment account." But I guess if you want to offer a "savings account" then you need to be a licensed bank and meet all the requirements and regulations that come with that?

Exactly. Capital lent is always at risk; effectively risk-free interest is an abstraction created by deposit insurance. (Which, too, could fail) I don’t understand where DeFi yields come from, but I can tell you they’re not risk-free, for the same reason a physicist can tell you your perpetual motion machine doesn’t work without studying the blueprints.

They could already be subject to those risks without getting the benefits.

But yes, DeFi seems to me mostly zero sum gambling where the risks are shifted around until nobody understands the system any more which naturally means that there is no risk any more.

Re: The SEC has told us it wants to sue us over Lend. We don’t know why

#240

Post by Danieru »

paulgb wrote: post #223
Reason077 wrote: post #217

Earlier quoted context omitted.

> "capital is not in theory at risk. So it's more like a savings account than an investment account." But I guess if you want to offer a "savings account" then you need to be a licensed bank and meet all the requirements and regulations that come with that?

Exactly. Capital lent is always at risk; effectively risk-free interest is an abstraction created by deposit insurance. (Which, too, could fail) I don’t understand where DeFi yields come from, but I can tell you they’re not risk-free, for the same reason a physicist can tell you your perpetual motion machine doesn’t work without studying the blueprints.

> I don’t understand where DeFi yields come from

Best I can tell from my research defi is being used for holder of volitile lower quality coins to exit without triggering a taxable event.

This is based on how all the pools I found had clear lopsided supply of lending and borrowing. Stable coins all had the highest rates, with btc and eth being middling, and a flood of alt coins sitting in pools earning zero returns.

This makes perfect sense. Margin loan volume is too low to explain the lending size. Likewise margin would want to borrow high volatility coins, and never stable coins. And yet stable coins are offering the highest interest precisely because stable coin borrowing is in demand.

Overall defi makes sense if it is about holders of paper gains exiting with debt to avoid taxable events. It does suggest a worrying risk profile I suspect everyone is underesitmating: many borrowers do not care about the coins they put up as collateral.

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