6 ms·

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 disadvanta

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.

seehafer 5y ago
Are the other companies already providing lending services public? Public companies get orders of magnitude more scrutiny from SEC relative to private companies.
- ac29 5y ago
  Other US companies providing similar products include Gemini, Kraken, and BlockFi. I dont think any of them are public. BlockFi's lending product has already been banned by several state regulatory agencies, but if they've been sued or warned by the SEC, I dont think thats been made public.
  - seehafer 5y ago
    Right. My point is that many federal agencies have mandates that dictate where they focus. For instance the SEC may come after any privately-owned startup, after the fact, if there’s overwhelming evidence of fraud (see: Theranos). But when you go public you enter into a whole new level of scrutiny, because regulating public markets is why the SEC even exists.
  - hackingforfun 5y ago
    There is a difference between lending assets and staking assets. Of the ones you mentioned, I've only used Gemini and Kraken. Gemini Earn offers similar lending products to Coinbase Lend (a % return is given when certain assets are lent) [1][2]. Kraken offers staking services [3], which are technically not "lending", but are staking rewards gained from staking assets in proof of stake protocols such as Ethereum 2.0, Polkadot, Kusama, Cosmos, Cardano, Solana, etc. These staking rewards could also be earned directly from the protocols, if users wanted to stake via their own hardware, but Kraken takes a fee in this case due to reducing the hassle for users to need to do this themselves (and some proof of stake protocols have slashing which means users would lose the coins they have staked if their hardware goes down or their connection is interrupted), so there is some reduction of risk as well for the user in that case. However, this also means the staking power is more centralized at the exchange level, which is a downside, but that is a different part of the discussion. FWIW, Coinbase has staking services as well [4], but Coinbase Lend, which hadn't even launched yet, was going to be something different. It looks like Coinbase was going to achieve that 4% interest on USDC in Lend via Compound [5] (which is a DeFi protocol they actually helped launch a few years ago [6]). Assets can already be lent directly to Compound via users, without Coinbase as an intermediary. Anyway, my point in bringing this up is there is difference between lending assets and staking assets, and actually both lending and staking can be done directly by users, without any of these exchanges as intermediaries. [1] https://www.gemini.com/earn https://www.gemini.com/earn [2] https://www.coinbase.com/lend https://www.coinbase.com/lend [3] https://www.kraken.com/en-us/features/staking-coins https://www.kraken.com/en-us/features/staking-coins [4] https://www.coinbase.com/staking https://www.coinbase.com/staking [5] https://blockworks.co/coinbase-compound-labs-launch-usdc-high-yield-accounts/ https://blockworks.co/coinbase-compound-labs-launch-usdc-hig... [6] https://techcrunch.com/2018/05/16/cryptocurrency-compound-interest/ https://techcrunch.com/2018/05/16/cryptocurrency-compound-in...
  - deleted 5y ago
    [deleted]
dataflow 5y ago
"We think others should be sued too" is quite a different argument from "we don't know why we're being sued". In fact it strongly suggests the opposite.
- kobasa 5y ago
  They don't know why they're being sued because everyone else is doing it and not getting sued. Makes sense from that point of view. Coinbase technically should only be sued if the others doing were sued too, but they're not... Compound this with the fact that no explanation was given to them why they're being sued - when it is very much necessary in light of their competitors not getting sued and you can start understanding their confusion.
ac29 5y ago
Something tells me courts wont be too sympathetic to the "but other people are criming as well" argument.
- bpodgursky 5y ago
  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.
  - pavlov 5y ago
    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-selective-enforcement-the-sec-and-initial-coin-offerings/ https://corpgov.law.harvard.edu/2019/11/21/regulation-by-sel... It shouldn’t be a surprise to anyone in this space.
    - twirlock 5y ago
      No one said anything about what's a "surprise" in a ~space~.
- runawaybottle 5y ago
  It’s a good way to shut down your competitors and get certain legislation in place where only your mega corp can meet the standards. They bought a lot of Bitcoin recently, which could be decent enough collateral to offer a SEC-sanctified lending product. The other low-end Bitcoin companies may not be able to play at a poker table with that high of a buy in. The only other companies that will be able to offer something like that will be mega corps like the big banks, PayPal, etc. If they need to also buy large amounts of Bitcoin as collateral, that’s a win-win for their entire industry (price goes way up). The name of the game is not user adoption. The name of the game is pump the price, because that’s marketing on its own.
- harry8 5y ago
  How about the SEC has repeatedly refused to prosecute for X in the past showing they, like us and multiple other parties doing business in this space, do not believe X is a crime. Given they've shown they don't think it's a crime and we and we agree and also don't think X is as crime, we have no idea why they're prosecuting us? I dunno, seems like an obvious interpretation but I could be totally missing it. I could care f.all about the SEC and blockchain coin stuff.
arcticbull 5y ago
"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
- madamelic 5y ago
  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.
  - arcticbull 5y ago
    It's their attorney's job to find out. This is why the have general counsel.
- SilasX 5y ago
  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"?
  - arcticbull 5y ago
    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.
chitowneats 5y ago
The SEC has limited resources. I applaud their decision to go after (potential) bad actors operating at scale. 6 months is a long time for back and forth to be had. It's not like they dropped this on Brian Armstrong's desk without notice.

seehafer 5y ago

Are the other companies already providing lending services public? Public companies get orders of magnitude more scrutiny from SEC relative to private companies.

ac29 5y ago
Other US companies providing similar products include Gemini, Kraken, and BlockFi. I dont think any of them are public. BlockFi's lending product has already been banned by several state regulatory agencies, but if they've been sued or warned by the SEC, I dont think thats been made public.
- seehafer 5y ago
  Right. My point is that many federal agencies have mandates that dictate where they focus. For instance the SEC may come after any privately-owned startup, after the fact, if there’s overwhelming evidence of fraud (see: Theranos). But when you go public you enter into a whole new level of scrutiny, because regulating public markets is why the SEC even exists.
- hackingforfun 5y ago
  There is a difference between lending assets and staking assets. Of the ones you mentioned, I've only used Gemini and Kraken. Gemini Earn offers similar lending products to Coinbase Lend (a % return is given when certain assets are lent) [1][2]. Kraken offers staking services [3], which are technically not "lending", but are staking rewards gained from staking assets in proof of stake protocols such as Ethereum 2.0, Polkadot, Kusama, Cosmos, Cardano, Solana, etc. These staking rewards could also be earned directly from the protocols, if users wanted to stake via their own hardware, but Kraken takes a fee in this case due to reducing the hassle for users to need to do this themselves (and some proof of stake protocols have slashing which means users would lose the coins they have staked if their hardware goes down or their connection is interrupted), so there is some reduction of risk as well for the user in that case. However, this also means the staking power is more centralized at the exchange level, which is a downside, but that is a different part of the discussion. FWIW, Coinbase has staking services as well [4], but Coinbase Lend, which hadn't even launched yet, was going to be something different. It looks like Coinbase was going to achieve that 4% interest on USDC in Lend via Compound [5] (which is a DeFi protocol they actually helped launch a few years ago [6]). Assets can already be lent directly to Compound via users, without Coinbase as an intermediary. Anyway, my point in bringing this up is there is difference between lending assets and staking assets, and actually both lending and staking can be done directly by users, without any of these exchanges as intermediaries. [1] https://www.gemini.com/earn https://www.gemini.com/earn [2] https://www.coinbase.com/lend https://www.coinbase.com/lend [3] https://www.kraken.com/en-us/features/staking-coins https://www.kraken.com/en-us/features/staking-coins [4] https://www.coinbase.com/staking https://www.coinbase.com/staking [5] https://blockworks.co/coinbase-compound-labs-launch-usdc-high-yield-accounts/ https://blockworks.co/coinbase-compound-labs-launch-usdc-hig... [6] https://techcrunch.com/2018/05/16/cryptocurrency-compound-interest/ https://techcrunch.com/2018/05/16/cryptocurrency-compound-in...
- deleted 5y ago
  [deleted]

dataflow 5y ago

"We think others should be sued too" is quite a different argument from "we don't know why we're being sued". In fact it strongly suggests the opposite.

kobasa 5y ago
They don't know why they're being sued because everyone else is doing it and not getting sued. Makes sense from that point of view. Coinbase technically should only be sued if the others doing were sued too, but they're not... Compound this with the fact that no explanation was given to them why they're being sued - when it is very much necessary in light of their competitors not getting sued and you can start understanding their confusion.

ac29 5y ago

Something tells me courts wont be too sympathetic to the "but other people are criming as well" argument.

bpodgursky 5y ago
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.
- pavlov 5y ago
  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-selective-enforcement-the-sec-and-initial-coin-offerings/ https://corpgov.law.harvard.edu/2019/11/21/regulation-by-sel... It shouldn’t be a surprise to anyone in this space.
  - twirlock 5y ago
    No one said anything about what's a "surprise" in a ~space~.
runawaybottle 5y ago
It’s a good way to shut down your competitors and get certain legislation in place where only your mega corp can meet the standards. They bought a lot of Bitcoin recently, which could be decent enough collateral to offer a SEC-sanctified lending product. The other low-end Bitcoin companies may not be able to play at a poker table with that high of a buy in. The only other companies that will be able to offer something like that will be mega corps like the big banks, PayPal, etc. If they need to also buy large amounts of Bitcoin as collateral, that’s a win-win for their entire industry (price goes way up). The name of the game is not user adoption. The name of the game is pump the price, because that’s marketing on its own.
harry8 5y ago
How about the SEC has repeatedly refused to prosecute for X in the past showing they, like us and multiple other parties doing business in this space, do not believe X is a crime. Given they've shown they don't think it's a crime and we and we agree and also don't think X is as crime, we have no idea why they're prosecuting us? I dunno, seems like an obvious interpretation but I could be totally missing it. I could care f.all about the SEC and blockchain coin stuff.

arcticbull 5y ago

"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

madamelic 5y ago
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.
- arcticbull 5y ago
  It's their attorney's job to find out. This is why the have general counsel.
SilasX 5y ago
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"?
- arcticbull 5y ago
  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.

chitowneats 5y ago

The SEC has limited resources. I applaud their decision to go after (potential) bad actors operating at scale. 6 months is a long time for back and forth to be had. It's not like they dropped this on Brian Armstrong's desk without notice.