The proposed yield product, called a Lend, would allow users to earn interest on digital assets. The regulator warned Coinbase that it considered the Lend product a security, which would bring it under the SEC’s jurisdiction. Chair Gary Gensler has previously said some digital assets and platforms are operating as or offering securities, bringing them under the SEC's oversight.
Why does that matter to the sustainable investor?
Cryptocurrency tends only to receive attention from sustainable investors in relation to climate emissions. It makes sense when you consider Coinbase’s environmental impact: the company scores a -29% on SDG 13 (Climate Action), thanks to its “significant impact on the energy production system and global warming.”
Things get more interesting on the social side.
The company scores a -57% on SDG 16 (Peace, Justice and Strong Institutions). Tax evasion, fraud, money laundering, bribery, organised crime, even terrorism: the list of indicators reads like an asset management compliance team’s worst nightmare.
It isn’t all bad. On SDG 8 (Decent Work and Economic Growth), Coinbase scores +38%; on SDG 9 (Industry, Innovation and Infrastructure), it scores +32%. For both categories, the company’s positive impact boils down to its association with innovation and financial inclusion. On SDG 17 (Partnership for the Goals), it gets a +31% thanks to its potential in international trade and, again, financial inclusion.
Financial inclusion is hard to navigate.
The SEC’s concern lies with retail investors, who could be caught out if they begin trading securities in an unregulated market. But, while the retail market arguably does require more oversight, this year has exposed a tension between retail traders and institutional investors and regulators that we shouldn’t ignore.
In the wake of r/WallStreetBets, the democratisation of finance has turned into a matter of social equity. The financial freedom of the type provided by Coinbase is a tonic to the retail audience, but at what cost? And what’s the solution?
The problem is bigger than Coinbase or crypto. Financial inclusion isn’t just a regulatory or commercial imperative: it’s an ESG one.