Alex Mashinsky, Founder and Chief Executive Officer of Celsius Network.
[Photographer: Dania Maxwell/Bloomberg]
The U.S. Securities and Exchange Commission is scrutinizing cryptocurrency firms Celsius Network, Voyager Digital Ltd. and Gemini Trust Co. as part of a broad inquiry into companies that pay interest on virtual token deposits, according to people familiar with the matter.
The SEC enforcement review focuses on whether the companies’ offerings should be registered as securities with the watchdog, said the people, who weren’t authorized to speak publicly. The firms are able to pay customers rates higher than most bank savings accounts by lending out their digital coins to other investors, a practice that the SEC and states including New Jersey and Texas have said raises concerns about investor protection.
The probes add to uncertainty for the burgeoning sector, which is grappling with sharply falling coin prices — Bitcoin earlier this month plunged 50% from an all-time high — as well as regulators who are eager to put guardrails around digital assets. BlockFi Inc., another crypto lender, faces SEC scrutiny, Bloomberg reported last year, and both Celsius and BlockFi have been the subjects of earlier enforcement actions by state securities regulators. Those reviews are ongoing, and the firms have disputed the allegations.
“We are one of many companies the SEC has reached out to regarding crypto yield products,” Gemini spokeswoman Carolyn Vadino said in a statement. “We are cooperating voluntarily with this industry-wide inquiry.”
“All discussions with regulators are confidential,” said Bethany Davis, a spokeswoman for Celsius. “We always have, and will continue to, work with regulators in the U.S. and globally to operate in full compliance with the law.”
The regulatory environment is evolving rapidly and “it’s normal for financial services companies, digital asset related or otherwise, to be in ongoing dialog with regulators,” Voyager spokesman Mike Legg said.
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The agency is considering whether these firms should file their offerings as securities with the SEC, Bloomberg reported, but the agency is not accusing any of the firms of wrongdoing at this time.
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These companies can pay higher interest rates on these assets than most banks do on savings accounts by lending their tokens to other investors.
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Several states, including Kentucky, New Jersey, Alabama and Texas have separately noted their unease with this practice by Celsius and BlockFi, among other companies.
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Gemini, Celsius and Voyager said they are cooperating with the SEC probe, Bloomberg reported.
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In September, the SEC threatened to sue crypto exchange Coinbase over a proposed lending program. Coinbase subsequently dropped its plans for the lending service.
-Via this site: Celsius, Voyager, Gemini Cooperate in Industry-wide SEC Probe Investigations Regarding Interest-bearing Token Deposits
-Also Referenced via: “SEC Scrutinizing Crypto Firms Over Interest-Paying Services“
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