Eoin Treacy's view -
SEC Chair Gary Gensler drew first blood last week. On Friday, Coinbase quietly abandoned the lending product, announcing the move in a short update to a months-old blog post.
“Crypto lending might be the easiest way for the SEC to get its hooks into the industry, but it’s very clear they’re looking at cryptocurrencies themselves,” said Tyler Gellasch, a former counsel at the SEC who heads the Healthy Markets Association, whose members include large asset managers. If many cryptocurrencies are deemed securities, exchanges such as Coinbase and the rest of the crypto industry “will not be able to make money the way they do today.”
Crypto lending incumbents, such as BlockFi Inc. and Celsius Network Inc., have already garnered more than $35 billion in deposits of traditional cryptocurrencies such as Bitcoin, as well as stablecoins, whose values are pegged at $1 and are considered a replacement for fiat money.
Crypto industry executives have said they suspect rival firms in the traditional finance industry, such as large banks, are responsible for pushing regulators.
In a September “Ask Me Anything” event with customers, Celsius Network Chief Executive Officer Alex Mashinsky said he believed bank executives had called the SEC and state regulators to complain about crypto lending firms.
“We have to work twice as hard because these guys have the largest lobbyists working for them at both at the state and the federal level,” Mashinsky said. “We’ll prevail. The fight is over all the money in the world, right?”
When the chairman of the SEC talks about the cryptocurrencies in the same terms as the myriad number of competing currencies in the USA ahead of the Civil War, that’s not good news for the sector. It suggests the freewheeling days of launching a token for any purpose one can dream of are numbered.
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