Various US states recently took Action against Celsius Network cryptocurrency lending platform accusing the company of providing unregistered securities to residents.
On Friday, September 17th, the Texas Securities and Exchange Commission – the Texas State Securities Board – filed legal action against Celsius Network, expecting the company to explain why it shouldn’t be ordered to stop shipping its products to citizens. The trial is scheduled to take place on February 14, 2021.
On Friday, the New Jersey Securities Commission – the New Jersey Bureau of Securities – ordered Celsius to stop shipping some of its products that the state considered unregistered securities. Alabama also placed a similar mandate calling for Celsius to show why it shouldn’t be prevented from shipping its products within the next 28 days.
As of September, Celsius had more than $ 24 billion in “community assets”. The crypto firm stated that these assets it manages would make it the world’s largest, if not the largest, interest account provider and cryptocurrency lender. The company offers clients a return of almost 9% on deposits of US dollar stablecoins such as USD Coin and Tether, up to 6.2% for Bitcoin and different interest rates for other cryptocurrencies.
Meanwhile, Celsius and other companies that offer cryptocurrency interest accounts have stated that they can pay such high returns because they lend the deposits at even higher interest rates to institutional investors who need to borrow cryptocurrencies to carry out their trades, such as arbitrage or short the market.
However, national and state regulators have stated that the companies are likely to be breaking the law and that the products, sometimes marketed as alternatives to bank savings accounts, should be registered with their authorities. The registrations would provide further details on disclosure to investors and regulatory oversight.
Cryptocurrency savings accounts
The development against Celsius Network came when Alabama, Texas and New Jersey were also among the US states that passed similar measures against leading cryptocurrency leader BlockFi in July.
During that time, the three US states mentioned that the BlockFi cryptocurrency platform may have violated securities laws by providing their interest-bearing accounts within their jurisdiction.
The three states said BlockFi did not register its BlockFi Interest accounts with state regulators and stated that such products could be unregistered security offerings.
BlockFi interest accounts allow customers to deposit their cryptos and earn interest based on how much and what types of assets are on deposit.
On September 7, the US Securities and Exchange Commission warned that they would sue Coin base when the stock exchange launches its new digital asset lending product. Coinbase plans to launch an income return product called Lend, which customers can use to earn interest in certain digital assets on the platform. The SEC regards the lend product as a security.
Image source: Shutterstock