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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

#401

Post by joshuamorton »

hajile wrote: post #397
phkahler wrote: post #367

Earlier quoted context omitted.

>> The real answer is to do away with the fractional reserve lending where a bank gets $100 and then proceeds to loan out $900. That is simply not true. It's a fiction (of sorts) told by people who feel fucked by the financial system.

It is basically true. I work hard and get paid $100 for what I did. I then deposit $100. The bank loans $90 to person X. Person X gives the money to person Y for some good or service. Person Y deposits $90 and now there is $190 in the bank. The bank loans $81 to person X+1. Person X+1 gives the money to person Y+1 for some good or service. Person Y+1 deposits $81 and now there is $271 in the bank. The bank loans $72.…

> The last person deposits and there is now $900 in the bank when only $100 worth of actual work has been done. $900 has been printed out of nothing and the original $100 has been devalued.

Are you claiming that when person x gives $90 to person y for some good or service, no work was done?

It seems to me that there were 3 transactions totalling 271$ in goods or services rendered, and $271 put into the bank.

> If I printed $900 and loaned it out, I'd be arrested.

Yes, because you aren't subject to the various banking regulations. Oftentimes privileges come with responsibilities.

> I get 0.05% interest off my hard work while the bank

Well of course, leaving your money in a savings account is kinda dumb. You too should invest it in a more active way if you want to make a profit.

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

#402

Post by vmception »

jrochkind1 wrote: post #279
vmception wrote: post #270

Earlier quoted context omitted.

at the state level, and the choice is still available to participants to lose their money whether it is plainly obvious or buried in 30 pages of disclaimers

The SEC appears to be arguing that Coinbases product should be regulated as a security.

for you to say that, you missed my point quite far.

"regulated as a security" itself can mean 100 different things, and its not a nuanced enough take to know if a product can be offered at all, to whom it can be offered to, what disclosures are necessary if any, and more

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

#403

Post by Denvercoder9 »

wallacoloo wrote: post #391
Denvercoder9 wrote: post #249

Earlier quoted context omitted.

It's not about the exact percentage, it's about it being significantly higher than the risk-free interest offered elsewhere in the market (which is <1%). That's a big red flag that it's not actually risk-free.

This is misleading. Different people asses risks differently. I have extremely little insight into the existing financial system: does my bank really have good security over their servers? Do they practice recovery on a regular basis so that there’s confidence my money will still be there when failures do happen? Will the IRS make a typo that results in my bank assets being frozen? I have zero insight into that. A lo…

Everything you mentioned (servers failing, hacks, etc) is operational risk, and that isn't what I'm talking about here. The point here is financial risk: things like a counterparty defaulting on their loan, the intermediary (a bank, Coinbase or their insurer) going insolvent when that happens too often, and you losing your "guaranteed" money.

The US government is generally regarded as the worlds most reliable debtor, and thus US government-backed securities (such as FDIC-guaranteed bank deposits), are seen as the lowest attainable risk and called "risk-free". Anyone offering higher interest rates must do something that incurs more risk to get the returns necessary to be able to pay that higher interest rate.

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

#404

Post by qwertox »

jrochkind1 wrote: post #279
vmception wrote: post #270

Earlier quoted context omitted.

at the state level, and the choice is still available to participants to lose their money whether it is plainly obvious or buried in 30 pages of disclaimers

The SEC appears to be arguing that Coinbases product should be regulated as a security.

I guess they are indirectly saying that if they are not under any other regulation (which they know they aren't), they will have to be treated as a security.

They are expecting Coinbase to show them who is regulating them. If they don't do it, they must be sued.

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

#405

Post by arcticbull »

SilasX wrote: post #394
arcticbull wrote: post #44

Earlier quoted context omitted.

"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

You really don't see anything wrong with, "It's illegal for you to do this but not your identical competitors with an identical product"?

The SEC didn't say that everyone else could do it. They said the action itself is illegal and they're beginning their enforcement actions at Coinbase. Nobody is allowed to do it, and a judgement in their favor here will allow them to expeditiously stop everyone else with the explicit precedent they form. That's almost certainly why they're pushing ahead.

It feels like your reaction is akin to a group of 5 cars speeding back to back, and the cop picks off the first guy to get a speeding ticket. They're all speeding. It's illegal for everyone. Enforcement resources are limited and they choose one to make an example of. If the others keep speeding they'll get caught afterwards too. Is it unfair the cop grabs the first guy? In a sense. But also so long as it slows everyone down; mission accomplished.

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

#406

Post by qwertox »

cplex wrote: post #268
vmception wrote: post #256

Earlier quoted context omitted.

Which should be a choice for all US residents to participate in, residents who can also go lose their money at casinos if they wanted, but are literally barred from participating in positive expected value financial systems. Just like Texas abortion laws, this is not enforced against the US resident, it is against the service providers, which has allowed this framework to persist for 70 years.

I mean, maybe? It’s quite clear to most people at casinos that they can lose all their money. Is it just as clear to people who “lend” uninsured money to a company?

A casino is similar to a lottery, you expect to lose some, but also to have the (small) chance to win a lot.

Coinbase is promising a fixed 4% earning. If they are to be taken serious, 4% does not mean the risk of losing it all, like in a casino.

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

#407

Post by spiralx »

morpheos137 wrote: post #399
phkahler wrote: post #367

Earlier quoted context omitted.

>> The real answer is to do away with the fractional reserve lending where a bank gets $100 and then proceeds to loan out $900. That is simply not true. It's a fiction (of sorts) told by people who feel fucked by the financial system.

I think it is more people who are ignorant about how monetary economics works. Try living in an economy without fractional reserve banking. You'll find credit is very hard to come by and interest rates are high.

Fractional reserve banking doesn't apply to the modern economy though, because we no longer use commodity-backed money where the economy is based on shuffling round physical tokens. Money is created by banks lending money when they update your balance.

https://www.bankofengland.co.uk/-/media/boe/files/quarterly-...

> This article explains how the majority of money in the modern economy is created by commercial banks making loans.

> Money creation in practice differs from some popular misconceptions — banks do not act simply as intermediaries, lending out deposits that savers place with them, and nor do they ‘multiply up’ central bank money to create new loans and deposits.

> In the modern economy, most money takes the form of bank deposits. But how those bank deposits are created is often misunderstood: the principal way is through commercial banks making loans. Whenever a bank makes a loan, it simultaneously creates a matching deposit in the borrower’s bank account, thereby creating new money.

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

#408

Post by twirlock »

uncomputation wrote: post #23

I actually initially wanted to be on Coinbase’s side here, but after a quick google of “Howey test” and reading even just the introduction on Wikipedia, I cannot imagine how they don’t see the SEC’s reasoning about Lend wrt Howey. If you want to argue that Howey does not apply or fight the decision/lawsuit, then fine. But feigning ignorance of something a (non-legal expert) programmer can connect the dots of instantl…

You somehow knew to Google the word test and are now appalled that coinbase doesn't know why they can't provide savings accounts. Ok.

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

#409

Post by morpheos137 »

spiralx wrote: post #407
morpheos137 wrote: post #399

Earlier quoted context omitted.

I think it is more people who are ignorant about how monetary economics works. Try living in an economy without fractional reserve banking. You'll find credit is very hard to come by and interest rates are high.

Fractional reserve banking doesn't apply to the modern economy though, because we no longer use commodity-backed money where the economy is based on shuffling round physical tokens. Money is created by banks lending money when they update your balance. https://www.bankofengland.co.uk/-/media/boe/files/quarterly-... > This article explains how the majority of money in the modern economy is created by commercial banks…

What part of this is not fractional reserve banking?

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

#410

Post by twirlock »

pavlov wrote: post #55
bpodgursky wrote: post #40

Earlier quoted context omitted.

That's not true at all? There is a ton of precedent for courts striking down selectively-enforced laws. Equality before the law is extremely important to how courts rule in the US.

The SEC intentionally does “regulation by selective enforcement”, as shown by their actions following the 2017 ICO bubble: https://corpgov.law.harvard.edu/2019/11/21/regulation-by-sel... It shouldn’t be a surprise to anyone in this space.

No one said anything about what's a "surprise" in a ~space~.
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