The banks were going to become insolvent in both scenarios. Coinbase is proposing you lend them Bitcoin, not other individuals. If they don’t put up the collateral and leverage hard and manage to fail for whatever reason, they pretty much screw everyone out of their coin.
This is a fairly well accepted lesson everyone digested by this point.
I don't think the SEC would say everything is fine if they changed the plan to have 10% more collateral. So I still don't understand this particular complaint.
The rule after Dodd-frank is closer to 100% collateral. But sure, the discussion really doesn’t start until we enter this realm, no point over discussing.
This is a fairly well accepted lesson everyone digested by this point.