On September 17, New Jersey’s securities regulator ordered Celsius, the crypto lending platform and network behind the altcoin project CEL, to cease its interest account offerings in the state. That same day, the Texas State Securities Board announced that a hearing would be held in February to consider whether Celsius would make a similar move to halt its bids in the state.
The company behind the popular altcoin project is in the focus of regulators
As we reported , New Jersey-based crypto lending company BlockFi has faced scrutiny from government securities regulators all summer for its high-interest crypto savings accounts. Coinbase has also been warned by the US Securities and Exchange Commission (SEC) that it will face lawsuits if it launches its high-yield Lending program. Now, Celsius, also in New Jersey, is receiving warnings from regulators.
The New Jersey Bureau of Securities issued a cease and desist order today to the company to stop offering subprime accounts to New Jersey clients until the end of October. Also today, the Texas State Securities Board (PTSB) ordered the company to go to an administrative hearing on February 14. PTSD requests that it stop serving customers in the Lone Star State.
What is the issue triggering the regulators?
The problem is Celsius’s crypto interest accounts. Customers register on the platform and deposit their cryptocurrencies in Celsius, which lends them; In return, customers receive much higher interest rates than those found in traditional bank savings accounts. The network advertises returns of up to 17 percent, although rates are updated weekly and vary by asset. Currently, stablecoins like Tether and USDC receive 8.88 percent, while Ethereum and Bitcoin collect around 5-6 percent per year.
Additionally, Texas and New Jersey say Celsius’s API partner program has increased the reach of such accounts because, according to the PTSD, “Celsius API Partners can then offer and sell unregistered Celsius Earnings Accounts to their customers. None of these have been approved by either state, as Celsius has not registered with institutions or the SEC to sell its tradable investment products, securities, Texas and New Jersey regulators said.
Many, including the SEC and some lawyers specializing in cryptocurrencies, consider “yield” products to be securities because they function as unsecured bonds that the borrower agrees to repay someone without collateral.