On Thursday, September 23, Kentucky’s securities regulator asked crypto lender Celcius to immediately stop offering its interest-paying accounts in the state. The cease and desist order coming from the Kentucky Department of Financial Institutions notes that Celcius offered unregistered securities to its customers.
The regulator noted that Celcius has violated the state law and didn’t disclose properly what they did with the customer deposits. The regulator also referred to these accounts as “the accounts “an unregulated market that represents an unprecedented risk to consumers”. Celcius can challenge this decision while appealing for an emergency hearing in the court.
Crypto lending businesses have been in the limelight that promise to offer much higher interest rates over traditional banking and financial institutions. However, the SEC and other regulators have been going hard after crypto lenders. In fact, even giants like Coinbase had to recently roll back their plan of USDC lending following their scuffle with the U.S. SEC.
Kentucky Joins Three Other States
With its recent move, Kentucky has joined other regulators like Alabama, Texas, and New Jersey in blocking Celcius. The crypto lender said that it has billions of dollars in deposits in interest accounts.
It also said that it sometimes pays double-digit yields to its customers. As said that such interest-bearing crypto accounts have faced increased scrutiny from the regulators in recent times.
Another big player which has been facing major regulatory heat is the popular crypto lending platform BlockFi. As reported by Bloomberg:
Securities regulators have argued that the interest accounts, which unlike bank savings accounts carry no federal deposit insurance, should be registered as securities and make more disclosures of their risks to investors.
Celcius hasn’t yet responded to the recent regulatory action against itself. But one thing is sure, as the crypto continues to mature, regulators will be more involved with all the activities in the crypto economy.