Coinbase Lend consists of pools of USD tokens received from “lenders” that are held separately from other Coinbase assets. So what is crypto lending and why Coinbase Lend Is Really a Securities Offering. Let’s find out by reading the article below.
What is crypto lending?
Crypto lending is the process of depositing cryptocurrencies that are lent to borrowers in exchange for regular interest payments. Payments are made in cryptocurrency, usually deposited and compounded on a daily, weekly or monthly basis.
Why is Coinbase Lend Really a Securities Offering?
The first version of the Coinbase Lend proposal seemed to imply that individual participants would be matched with specific “eligible borrowers.” Therefore, Coinbase will simply be a custodian, making sure interest payments are sent to the correct customers and managing the process. Coinbase makes it sound like "you" (the customer) are making the loan, and Coinbase's only obligation is their "guarantee". In this version, through a direct placement, Coinbase is apparently facilitating the issuance of unregistered securities by these “qualified borrowers.” From the SEC's perspective, the case against this version is very open and closed.
But it's not worth spending that much time on this version of their Lend language. There are few details about this release, it will be very difficult to manage, and Coinbase may not even intend to release it in this way. More likely, the company proposes creating a “big pot” where these USDC “deposits” will be held, and Coinbase will lend out from.
"For the purposes of the Securities Act, an investment contract means a contract, transaction or plan whereby a person invests his funds in an ordinary enterprise and expects to obtain profits only through the efforts of the promoter or a third party, it does not matter Whether the shares are evidenced by a formal certificate, or by a notional interest in a tangible asset used in the business."
Because Coinbase Lend consists of pools of dollar tokens received from “lenders” that are held separately from Coinbase’s other assets, they are “common businesses” within the meaning of securities laws. "Investors" expect that Coinbase ("Sponsor or third party") will lend and manage Coinbase Lend from this pool. In this way, they can earn returns that are much higher than what traditional savings accounts pay.
I hope this article will help you to learn what is crypto lending and why Coinbase Lend Is Really a Securities Offering. Cryptocurrency lending platforms offer investors the opportunity to borrow against deposited crypto assets and be able to lend cryptocurrencies to earn interest in the form of crypto rewards.
