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ARTICLE · 13 SEPTEMBER 2021

Coinbase Says SEC May Sue To Stop Its Lending Program

Hogan Lovells Cadwalader
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The program would allow customers to lend USD Coin to Coinbase and earn interest.

United StatesCorporate/Commercial Law
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On The Coinbase Blog, Chief Legal Officer Paul Grewal stated that the SEC issued a notice to Coinbase indicating the agency's intention to bring an enforcement action against Coinbase if it were to launch its proposed Coinbase Lend ("Lend") program. The program would allow customers to lend USD Coin to Coinbase and earn interest. (USD Coin is a dollar-based stablecoin created by Coinbase.)

Mr. Grewal asserted that Coinbase's Lend program is neither an investment contract nor a note, so customers would not be "investing" in the program, but rather "lending" the USD Coin the customer already holds on the platform. He said that the SEC appears to consider Coinbase Lend a program that involves a security, under the Howey and Reves tests.

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