Posted 10th September 2021

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?

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. 

image showing two different yields: usage-based vs lend-based

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. 

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

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.

This publication is for informational purposes only and is not intended to be a solicitation, offering or recommendation of any security, commodity, derivative, investment management service or advisory service and is not commodity trading advice. This publication does not intend to provide investment, tax or legal advice on either a general or specific basis.