Policing the Crypto Market – What SEC’s threat to Sue Coinbase Means for Crypto Investors

Global cryptocurrency exchange platform, Coinbase, is facing legal action from the Securities and Exchange Commission (SEC) against their proposed “Lend” programme this week.

The US-based platform had been in close communication with Gary Gensler, Chairman of the regulatory body, six months prior to the threat to sue Coinbase was made brutally clear with the presentation of a Wells notice. 

The confrontational route of a Wells notice is a clear signal from the SEC that enforcement against a recipient is forthcoming – typically utilised against potential violation or breach of securities. 

SEC initially did not expand on the rationale behind the call against the potential security threat of the ‘Lend’ scheme. However, Gensler has already made a point of branding the crypto-verse as the wild west of finance. 

Enrolling in Coinbase’s proposed scheme would enable eligible users to earn an annual yield on USD coins lent to eligible borrowers. Furthermore, the company assures that it’s a safe investment guaranteed by Coinbase that enables Lenders to earn a recurring yield. 

Why the fuss?

The regulatory crackdown on crypto from SEC may in fact point to the wider narrative of distrust for the volatility of cryptocurrencies, and most importantly decentralised finance (Defi). 

What’s interesting in this scenario, was voiced by Coinbase CEO, Brian Armstrong in the Tweet:

“How can lending be a security?”

Armstrong raises a pertinent question. Anyone who knows anything about finance is no stranger to the principle of lending, but it seems the issue here is the context: who is doing the lending. 

After all, it is the act of lending money for it to become credit that the current debt-based economic model was built upon. 

In our current low or negative-yielding environment this single factor may be the tipping point for many individuals on the verge of starting the cryptocurrency investment portfolio. 

Whether it’s the aftershocks of the Covid-19 pandemic or the unappealing interest rates on cash ISAs, fixed-rate bonds or other saving options, yields come as a desirable option. 

Usage-based Yields vs. Lend-based Yields

One aspect that has noticeably been absent from the discussion of yielding in relation to Coinbase, is that there is in fact an alternative. 

As the Kinesis yield model is entirely usage-based, users are rewarded the more they collectively participate in the platform – even if that means simply holding their respective gold or silver currencies in our vaulted facilities, free of charge. 

In comparison with Coinbase, the Kinesis yield model is built upon revenue generation from transaction fees of fully-backed assets existing within its system.

This means users can rest assured that a usage-based yield entails a drastically lower level of risk than lending does.

With lending, even in the cryptocurrency sphere, the act of borrowing currency still presents wider implications, considering that Coinbase’s crypto-backed by the US dollar is no more stable just because it exists in a digitalised format. 

What’s more, it is no secret that the dollar continues to depreciate in value, losing as much as 97% since the establishment of the Federal Reserve in 1913. At the same time, gold continues to greatly appreciate in value over time, making it the safe haven for investors looking to hedge against inflation.

Kinesis offers a sustainable alternative for users, with a stablecoin that is backed with the 1:1 allocation of gold (KAU) or silver (KAG). 

In our historic Minter’s yield launch, 14,052 grams of gold (KAU) and 1,686 ounces of silver (KAG) were distributed back to minters on the Kinesis Monetary platform. 

Kinesis is transforming the universal standard we hold for money, in order to create an ethical, fair, and debt-free economy that is accessible for the benefit of all.

 Start benefitting from the Kinesis Yield System today.