- Coinbase co-founder and CEO Brian Armstrong is displeased by the SEC disproving their yield farming feature.
- He called for a published and evenly applied guidance on the crypto lending feature.
The US Securities and Exchange Commission (SEC) recently dismissed Coinbase decision to launch its yield farming feature. Brian Armstrong, the co-founder, and CEO of Coinbase took to Twitter to express his disappointment. Many crypto projects and crypto holders have been engaging in the service for years without any litigation, he tweeted. The SEC’s move was therefore biased, unfair and in Armstrong’s words, “sketchy”.
1/ Some really sketchy behavior coming out of the SEC recently.
— Brian Armstrong (@brian_armstrong) September 8, 2021
Of note, yield farming is staking or lending one’s crypto assets to generate returns in the form of cryptocurrency. The DeFi feature has garnered popularity growing into one of the most prominent ecosystems in the digital asset space. Coinbase had plans for the same: “Earn 4 percent APY on USD Coin with Coinbase,” read a blog. The crypto lending feature was to be launched in a few weeks.
However, after the company briefed the SEC of their decision, they were told that the lending feature is security. The regulator did not explain this judgment and threatened to sue Coinbase should the launch proceed. Armstrong wrote;
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,
SEC invalidates Coinbase Yield Farming
On top of that, he pointed out that there was no guidance provided by the SEC on yield farming. It remains unclear whether or not the feature is allowed and why this rule is not enforced equally in the crypto industry. “[…] plenty of other crypto companies continue to offer a lending feature, but Coinbase is somehow not allowed to,” Armstrong said.
Quoting SEC Chair Gary Gensler, Armstrong urged regulatory clarity rather than “engaging in intimidation tactics behind closed doors.”
Gensler in his confirmation hearing: “It’s important for the SEC to provide guidance and clarity,” Gensler said. Contrary to this, the SEC refused to meet with Armstrong shortly after Coinbase became the first crypto company to go public.
“Regulation by litigation”
Additionally, Armstrong argued that the SEC’s position was only creating an unfair market rather than protecting investors as is paramount. More so, “regulation by litigation should be the last resort for the SEC, not the first.”
Moving forward, Coinbase might carry on with the launch then deal with the legal drawbacks later on. This was implied as Armstrong tweeted, “If we end up in court we may finally get the regulatory clarity the SEC refuses to provide.”
A while ago, Ripple, currently sued by the SEC, warned other crypto players that the regulator was out to get everyone. This may be what is at play. However, others have simply disregarded it as a karmic consequence of the company’s poor customer support.