Alex Mashinsky, founder and CEO of Celsius Network, one of the largest crypto lending platforms, said he is “cheering for Coinbase” to resolve any uncertainty in compliance and regulation regarding its planned Lend product, which lets users earn interest on lending cryptocurrency. 

“Everybody in this business wants to have clarity,” Mashinsky said. 

Mashinsky made the comments after Nasdaq-listed crypto company Coinbase Global Inc.
COIN,
-0.69%

disclosed that it received a Wells notice from the Securities and Exchange Commission. The regulatory said it intended to sue the exchange if it launches its lending initiative.  

In a series of tweets, Coinbase Chief Executive Brian Armstrong on Tuesday called the SEC’s actions “sketchy” and “intimidation tactics behind closed doors,” and charged that other crypto companies are able to offer such lending.

The program was designed to let customers earn interest of around 4% APY by lending their holdings of Circle’s stablecoin USDC, a cryptocurrency pegged 1:1 to U.S. dollars, to Coinbase, who would then lend the funds to other institutions. If launched, it would be Coinbase’s first endeavor in crypto lending. The company currently lets customers borrow cash using bitcoin as collateral, and stake their cryptocurrency to earn rewards. 

According to Mashinsky, the core of the disputes between Coinbase and the SEC is “very narrow,” and centers on whether “offering yields on stablecoins” converts it into a security.

“I think the media has missed that point. They think that the fight is over everything,” Mashinsky said. 

However, Coinbase’s stablecoin-focused lending product isn’t the only thing that caught regulatory attention. Another crypto lender, BlockFi, has been accused by regulators at five states of violating securities laws because of its BlockFi Interest Account, which allows users to earn yields by depositing cryptocurrencies that range from bitcoinBTCUSD to etherETHUSD to stablecoins.

“We are in active dialogue with regulators regarding the BIA and we firmly believe that it is lawful and appropriate for crypto market participants,” BlockFi wrote in a recent statement.

Despite regulatory pressure on the sector, Mashinsky argues that Celsius, which he says only provides collateralized crypto lending, could be safer than some traditional financial institutions. 

“If you think of a financial institution that issues credit cards, that is 100% unsecured lending. We don’t do any of them,” Mashinsky said. “We also don’t have any leverage, we’re not a bank, we don’t have fractional reserves.”

“We haven’t been in a single situation where a counterparty or borrower defaulted, and we had to liquidate their collateral. Again, there’s no Fed, there’s no FDIC, you don’t need any of these systems, because everything is asset-backed,” Mashinsky said, referring to the Federal Deposit Insurance Corporation, which provides deposit insurance to member banks.

Earlier this year, in an AMA (ask me anything) video on YouTube, Mashinsky denied CoinDesk’s report that the company has been re-hypothecating its assets, which refers to scenarios when banks and brokers use assets that are posted as collateral by their clients, for their own purposes.

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