Coinbase Calls the SEC's Bluff

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Coinbase CEO Brian Armstrong threw down the gauntlet, challenging the Securities and Exchange Commission to explain its opposition to Coinbase’s planned high-interest-earning product, Lend.

The conflict is a perfect illustration of the markets and the moment. With Coinbase Lend, the company is dangling a prospect that appears unsustainable: a yield of 4% on savings, when mainstream banks are offering less than .5%. But who’s going to tell a crypto company what’s unsustainable in 2021?

On the one hand (bear with me), other crypto-connected companies are already offering the sort of product Coinbase is touting here. BlockFi and and Gemini are two examples. As Armstrong points out, Coinbase was being a rule follower by consulting the SEC ahead of its launch, which the others didn’t do. (Coinbase is also a public company and should expect to be subject to more scrutiny, but let’s put that aside.)

On the other hand (ahem), this product is a lot less straightforward than it appears. Coinbase says it will lend out the deposits. Only the the principal is “guaranteed by Coinbase,” the company says, but not the interest. So it’s marketed like a savings account, but it’s not really like a savings account. The SEC says it will sue Coinbase if it launches the product.

Big picture, this is another company making a huge bet that its vision of the future is powerful enough to withstand the weight of debt obligations and a potential economic shock. Eventually, we’ll find out who’s right.

While you were sleeping …

Sen. Elizabeth Warren, D-Mass., sent a letter to Amazon on Wednesday demanding it do more to stop the spread of Covid misinformation through dubious products on the marketplace. CNBC

Microsoft said Tuesday it has acquired Clipchamp, a start-up with software that consumers and corporate workers can use to edit videos. Terms of the deal weren’t disclosed. CNBC

In the broader world …

Mortgage rates appear to be stuck in a holding pattern, giving borrowers no particular incentive to act, especially on refinances. Total mortgage application volume fell 1.9% last week compared with the previous week, according to the Mortgage Bankers Association’s seasonally adjusted index. It was at the lowest level since last July. CNBC

On the horizon …

Today, 4 p.m. ET / 1 p.m. PT: A Fortt Knox Deep Dive on Growth Stage VC with Pat Grady, partner at Sequoia Capital

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