HONG KONG (Reuters) – The u.s. Securities and Exchange Commission (SEC) has threatened to sue Coinbase Global Inc if the crypto exchange goes ahead with plans to launch a programme allowing users to earn interest by lending crypto assets, Coinbase said on Wednesday.

The SEC has issued Coinbase with a Wells notice, an official way it tells a company that it intends to sue the company in court, Paul Grewal, the company's chief legal officer said in a blog post. He said Coinbase would delay the launch of its ‘Lend' product until at least October as a result.

Programmes that allow owners of cryptocurrencies to lend these in return for interest are becoming more common around the world, but some regulators, particularly in the United States have started to raise concerns, arguing that such products should comply with existing securities laws.

The U.S. state of New Jersey ordered the cryptocurrency platform BlockFi Inc https://www.reuters.com/legal/transactional/new-jersey-orders-blockfi-cryptocurrency-firm-stop-offering-interest-bearing-2021-07-20 in July to stop offering interest-bearing accounts that have raised $14.7 billion from investors.

Grewal said in his blog that the SEC's concerns about Coinbase's ‘Lend' were related to the fact that the regulator believed the product involved a security. Grewal said Coinbase felt that this was not the case.

The SEC did not respond to an emailed request for comment outside office hours.

(Reporting by Alun John in Hong Kong and Kanishka Singh in Bengaluru; Editing by Ana Nicolaci da Costa)
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