Digital currency trading firm Coinbase will be sued by the US markets regulator, the Securities and Exchange Commission, if the company goes ahead with plans for a cryptocurrency lending scheme. 

The lending program would allow users to earn interest by lending digital money, but the SEC has classified the product as an investment security.

Coinbase's chief legal officer, Paul Grewal, said the SEC told the company last week that it intended to legally charge Coinbase, so the firm planned to delay the launch of its "Lend" product until at least October.

Loading

The company's chief executive officer, Brian Armstrong, took to Twitter to slam the agency's handling of the firm's plans to roll out the product and said the agency had denied him a meeting.

An SEC official told Reuters that the agency had held discussions with Coinbase.

Both its chief executive officer and its chief legal officer said that Coinbase disputed the SEC's determination. 

The executive's remarks provide a glimpse into the rising tension between the cryptocurrency industry and regulators.

SEC chairman Gary Gensler has described the industry as a "Wild West", riddled with fraud and investor risk. 

Mr Gensler has said some digital assets and platforms were operating as, or offering, securities, bringing them under the SEC's oversight.

Coinbase shares fell 3.2 per cent, to $US258.20.

Bitcoin rose 0.3 per cent, to $46,270 per digital coin. 

Australian stocks take a hit

Meanwhile, the local share market tumbled after a fall overnight on Wall Street, with weaker mining stocks after the iron ore price fell, and a number of companies traded ex-dividend. 

At 12:50pm AEST, the All Ordinaries lost 1.5 per cent of its value to 7,693. 

Chief investment officer at Burman Invest, Julia Lee, said the losses on the All Ordinaries index amounted to around $30 billion at lunchtime. However, Ms Lee noted that stock markets were trading near record highs and were due for a correction, which is when a stock market falls at least 10 per cent from its peak. 

Big miners and industrial stocks weighed on the market after the price of iron ore fell more than 4 per cent overnight to $US130.70 a tonne. 

Rio Tinto lost 2.3per cent, BHP fell 1.5 per cent and Fortescue Metals declined by 0.3 per cent by 12:40pm AEST.

"It's those miners that are doing a lot of the damage today," Ms Lee said. 

At 12:50pm AEST, just 13 stocks were higher on the ASX 200, three were steady and 184 were making losses.

The benchmark index was down 1.5 per cent to 7,399 at 12:50pm AEST with all industry sectors in the red. 

Leading the falls on the ASX 200 were litigation funder Omni Bridgeway (-5.9pc), financial firm Virgin Money (-6.9pc) and lithium miner Orocobre (-5.2pc). 

Going up were medical device firm Resmed (+2.3pc), miner Whitehaven Coal (+2.4pc) and gold miner Gold Road Resources (+1pc).

The Australian dollar dropped 0.1 per cent to around 73.59 US cents at 12:50pm AEST. 

NAB says Delta taking its toll 

The National Australia Bank said there has been a huge reduction in borrowers deferring repayments on their loans since last year's COVID-19 shutdowns because the current lockdowns had been less financially damaging. 

Ross McEwan has told a parliamentary committee that, at the end of August, around $1.8 billion worth of loans were deferred, compared to $58 billion at the height of the pandemic last year. 

However, he said, the number of customers in financial hardship had risen since the outbreak of the Delta variant of the virus. 

"Many businesses are in a state of hibernation, waiting for restrictions to open up and ready to get going again," he said.

Mr McEwan also said that Australia needed its own national vaccine pass — as in European countries — that was ready to launch when 80 per cent of the population is double-vaccinated.

"Current forecasts show 80 per cent of eligible Australians will have had their first jab within three weeks, and their second jab by mid-November," Mr McEwan said.

NAB shares were down 1.5 per cent to $28.42 at 12:50pm AEST.

Commodities mixed 

ANZ economists said crude oil prices gained overnight as supply issues plague the market, with US production struggling to recover from Hurricane Ida.

The US Bureau of Safety and Environmental Enforcement said more than three-quarters of production remained shut in the Gulf of Mexico.

Brent crude slipped back in morning trade, to $US72.51 a  barrel, while spot gold was weighed down by the stronger US dollar. 

It traded around $US1789.53 an ounce as it steadied in Asian trade. 

US stocks taper 

Trade on Wall Street pulled back as investors worried about rising COVID-19 cases around the world as well as the timing of the US Federal Reserve's plan to ease back on its pandemic stimulus. 

The Dow Jones Industrial Average lost 0.20 per cent, to 35,031, the S&P 500 dropped 0.13 per cent, to 4,514, and the Nasdaq Composite lost 0.6 per cent, to 15,286.

Six of the 11 S&P 500 sector indices fell, with materials and energy the deepest decliners, down more than 1 per cent each.

Apple (-1pc) and Facebook (-1.2pc) fell after helping push the Nasdaq index to record highs in the previous session.

Digital currency platform Coinbase dropped after the corporate regulator the Securities Exchange Commission threatened to sue it. 

Payments firm Paypal fell after buying a Japanese buy now, pay later company. 

The dips in those two Silicon Valley giants contributed more than any other companies to the S&P 500's decline for the session.

Investors have become more cautious after Friday's weak August payrolls data, while pressures from rising costs, despite the economy slowing, have increased concerns that the Fed could move sooner than expected to scale back massive monetary measures enacted last year to shield the economy from the COVID-19 pandemic.

In its latest Beige Book report, the Federal Reserve said the North American economy had "downshifted slightly" in August as concerns grew over how the renewed surge of COVID-19 cases would affect the economy's recovery. 

Chief investment strategist at CFRA Sam Stovall said shareholders were hedging their bets. 

"They can't make up their minds, so they have not committed to long-term positions."

St Louis Federal Reserve Bank president James Bullard told the Financial Times that the Fed should move forward with a plan to trim its pandemic stimulus program despite a slowdown in job growth. 

European markets weaker 

Across the Atlantic, European shares fell on jitters that the European Central Bank will start to roll back its pandemic stimulus. 

The FTSE 100 index lost 0.8 per cent, to 7,096 , the DAX in Germany fell 1.5 per cent, to 15,610, while the CAC 40 in Paris 6,669, down 0.9 per cent.

The ASX SPI 200 index has fallen 0.5pc, to 7,478, while the Australian dollar lost ground to 73.65 US cents.

ABC/Reuters