Coinbase Global (COIN) shares slumped lower Wednesday after the cryptocurrency exchange group said it received a Wells Notice from the U.S. Securities & Exchange Commission.
Coinbase said the notice, which is essentially a formal intention from the securities regulator to sue, is linked to the company's plans to allow users on its platform to earn interest by lending their cryptocurrency assets- a program it calls 'Lend'.
"Despite Coinbase keeping Lend off the market and providing detailed information, the SEC still won’t explain why they see a problem," Coinbase's chief legal officer, Paul Grewal, wrote in a blogpost late Wednesday. "Rather they have now told us that if we launch Lend they intend to sue. Yet again, we asked if the SEC would share their reasoning with us, and yet again they refused."
"The net result of all this is that we will not be launching Lend until at least October," he added. "Coinbase continues to welcome additional regulatory clarity; mystery and ambiguity only serve to unnecessarily stifle new products that customers want and that Coinbase and others can safely deliver."
Coinbase shares were marked 4% lower in early trading Wednesday to change hands at $256.16 each.
Last month, posted better-than-expected second quarter earnings and a surge in dealing volumes, while net revenues rose 1,100% from last year to $2 billion.
Retail monthly transacting users, a key metric in tracking sustainable platform growth, was up 44% from the first quarter, Coinbase said, and more than 9,000 institutional clients are now using its crypto platform.