Celsius has been charged with offering unregistered securities to residents of Texas, and the company is expected to explain why it should be allowed to continue selling its products in the state.
The fiasco with Celsius securities
Regulatory authorities in Texas, Alabama, and New Jersey have criticized Celsius, a crypto lender and major player in the DeFi space. Texan authorities ordered Celsius to cease operations and provide evidence as to why the company should be allowed to continue providing services to the state of Texas on Friday, September 17, 2021. Only certain products were deemed unfit in Alabama, and Celsius was ordered to stop selling them by November 1.
DeFi is put to the test.
Regulators in Texas, Alabama, and Vermont all reacted negatively to BlockFi. BlockFi Interest Accounts were flagged by Vermont regulators, who questioned their legality and status, while New Jersey authorities determined that they were unregistered securities.
Coinbase has recently come under fire from regulators, and it could face an SEC lawsuit if it moves forward with its Lend product, which aims to compete with BlockFi. BlockFi’s limitations were limited to the prohibition of new accounts, and BlockFi customers who used the service prior to the regulatory impact were unaffected.
Celsius is being investigated for allegedly selling unregistered securities.
Although it incorporates aspects of both centralized and decentralized finance, Celsius’ operations fall under the broad category of decentralized finance, or “DeFi.” Celsius essentially functions as a digital asset bank. Users can deposit their cryptocurrencies and earn interest on their deposits. It lends using deposits and earns money from the interest borrowers must pay. Interest is usually paid out in CEL or as a percentage of the original cryptocurrency. Stablecoin deposits can yield up to 12.5 percent Annual Percentage Yield. Celsius is one of the largest lenders in the crypto-lending space, with over $24 billion in community assets.
Crypto-lenders are adamant in their opposition.
A Celsius representative expressed vehement disagreement with state regulators’ rulings in a recent interview, claiming that the company is complicit with the law. This echoes a similar sentiment expressed by BlockFi’s CEO following the Vermont allegations, who stated that the company’s interest-bearing accounts are not securities and thus should not be barred from serving Vermont residents.