Coinbase Exchange Faces SEC Investigation over DeFi Products

    Coinbase facing another lawsuit as SEC has begun an investigation into the products offered by the exchange to customers.

    Particularly, in its recent quarterly report that recorded a loss of up to $1.1 billion, Coinbase disclosed it has received investigative subpoenas and requests from the U.S. Securities and Exchange Commission (SEC) for documents and information about certain customer programs, operations, and existing and intended future products.  

    SEC’s requirement covers Coinbase’s processes for listing assets, the classification of certain listed assets, its staking programs, and its stablecoin and yield-generating products. 

    Earlier in 2021, SEC threatened to sue Coinbase if the exchange continued to deploy a lending product called Lend, for stablecoin USDC with an interest rate of 4% per year. Under this model, users can earn interest by lending their tokens. Later on, Coinbase canceled the project.

    Despite the investigation, Coinbase emphasized in a letter to shareholders that the company’s financial condition will not be affected:

    “The Company believes the ultimate resolution of existing legal and regulatory investigation matters will not have a material adverse effect on the financial condition, results of operations, or cash flows of the Company.” 

    The disclosure underscores the heat Coinbase faces as a vocal US crypto company. It is under pressure on multiple fronts, including its belief that certain tokens are not securities and therefore exempt from the SEC’s purview.

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