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Authorities in New Jersey and Texas are taking action against the Celsius network of the cryptocurrency group for allegedly offering unregistered securities, as regulators oppose the issuers of digital asset lending products.
The Attorney General’s Office in New Jersey, Friday order the company to stop issuing interest-bearing cryptocurrency products through a stop-and-stop order. Texas government regulators have a notice to request a hearing in February to determine whether similar steps should be taken.
Both argued that the company’s interest-bearing crypto accounts, known as Celsius Earn, constituted an unregistered bond offering.
The New Jersey regulator added that the company “at least partially financed its lending operations and own trading” by selling these unregistered bonds, which he said raised more than $ 14 billion for Celsius, which is based in the city. of Hoboken, New Jersey.
“Financial companies operating in the cryptocurrency market are on notice,” Andrew Bruck, the state’s acting attorney general, said Friday. ‘If you sell securities in New Jersey, you must comply with New Jersey’s investor protection laws. Businesses trading in cryptocurrencies are not immune to surveillance. ”
Crypto platforms offer interest on digital assets become popular thanks to the substantial returns offered. Celsius, one of the largest lenders with more than 100,000 U.S. interest-bearing accounts, annually advertises 8.8 percent interest on deposits of digital coins pegged to the U.S. dollar, along with other tokens.
Crypto-lending products now face a regulatory setback. Agencies in five states – Alabama, Kentucky, New Jersey, Texas and Vermont – do the same actions against BlockFi, a lending group that raised $ 14.7 billion by offering interest-bearing crypto accounts. BlockFi denies the allegations.
Coinbase, the largest US cryptocurrency platform, revealed last week that the US Securities and Exchange Commission warned it would sue the company as he pursues his plans to launch Lend, a new digital asset return product of his own.
Meanwhile, SEC Chairman Gary Gensler told a Senate committee on Tuesday that crypto markets do not have adequate consumer protection, “especially lending,” as dual momentum for more regulation in the industry is gathering steam.
State and federal regulators argue that these crypto-lending products can be defined as an ‘investment contract’, which makes it a security and requires issuers to undergo formal registration and post additional disclosures.
But many in the crypto community deny the interpretation and claim that regulators have it fails to provide sufficient clarity on the matter.
In an interview with the Financial Times last week, Celsius CEO Alex Mashinsky said he was “very confident” that none of Celsius’ products in the US are securities. Celsius did not immediately respond to a request for comment.
Celsius was historically based in the UK, but in June said it will move its main business operations and headquarters to the US and “where applicable, to several other jurisdictions”.
The Texas State Securities Board said it notified Celsius in May that it might violate the Securities Act and explain the legal requirements. The board said Celsius did not stop offering its loan products after receiving the warning.
Celsius said it generates its cryptocurrencies through lending and mining of cryptocurrencies, but state regulators said the company also trades in business and other types of transactions.
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