Cryptocurrency exchange Coinbase, which recently went public, says it’s facing possible enforcement action from the Securities and Exchange Commission (SEC) over its Coinbase Lend product that it expected to launch in the coming weeks.

Why should we care?
The recent blowback from the SEC – if true – may offer clues as to what's in store for crypto regulation down the road. According to a blog post authored by Coinbase’s chief legal officer Paul Grewal, the regulator warned that it may sue the company if it launches Coinbase Lend, a product that allows users to lend cryptocurrency. Through it, eligible customers could earn interest on select assets on Coinbase, starting with 4% annual percentage yield on USD Coin (USDC). The news caught Coinbase by surprise, especially since it’s been keeping regulators informed about the product for “nearly six months,” according to the company. The problem, says Coinbase, stems from the SEC’s view that Coinbase Lend is a security, or an investment. Coinbase disputes this classification, saying “...it’s not an investment contract or a note. Customers won’t be ‘investing’ in the program, but rather lending the USDC they hold on Coinbase’s platform in connection with their existing relationship.”