- Celsius to stop soliciting or selling its interest-bearing accounts to Kentucky citizens
- These investment contracts allow passive investors to receive profit in the form of interest on assets placed with the company
- state securities regulators may take action against other crypto companies that offer interest-bearing digital currency accounts
The cryptocurrency loan platform Celsius and the company’s interest-earning accounts are under investigation in four jurisdictions in the United States. The crypto lender Blockfi has also been plagued by the same difficulties, with numerous states issuing orders to the corporation about its interest-bearing accounts. Following the actions of New Jersey, Texas, and Alabama, Kentucky has ordered Celsius to stop soliciting or selling its interest-bearing accounts to Kentucky citizens.
Celsius Network allows its customers to deposit their bitcoins, which can subsequently be leased out to institutions for up to 17% profits. Each week, the customer is paid new coins and he will be able to borrow money at 1% interest. The company’s website boasts, Buy coins, earn yield, borrow, and transfer with no costs.
Kentucky’s securities authority believes the Celsius interest-bearing accounts are securities, as do the rest of the state securities regulators.
Cease and desist order to Celsius
The company is issuing securities in the form of investment contracts in exchange for the deposit of assets with the company, according to the department. These investment contracts, which qualify as securities under the Act, allow passive investors to receive profit in the form of interest on assets placed with the company.
In the last three years and four months, 1,607 EIAs have been opened for 1,571 Kentucky investors, according to the order. In total, citizens of the state have invested $17.6 million in various cryptocurrencies with Celsius, with the business paying them slightly over $453,000 during that time.
The regulator stated as part of its reasoning that all securities, including Celsius’ EIAs, must be properly registered as such. According to the Department’s records, neither Celsius nor the EIAs available on its website are registered with the Department as required by the Act. Furthermore, neither Celsius nor these EIAs appear to be eligible for any registration exemption under the Act, the order concluded.
Regulators sees additional risks for investors
Unlike Blockfi, the Celsius Network has not used Twitter or its blog to respond to state regulators’ charges. While Celsius’s co-founder previously acknowledged difficulties with Facebook authentication techniques, the Kentucky cease and desist order had not been mentioned as of this writing. According to Kentucky’s securities watchdog, Celsius investors face additional risks.
All four states make identical arguments and contend that Celsius accounts pose the same concerns. Regulators in New Jersey and Vermont, as well as Texas, Alabama, and Kentucky, had difficulties with Blockfi.
Furthermore, state securities regulators may take action against other crypto companies that offer interest-bearing digital currency accounts. The spokesperson of Celsius was upset that the actions had been brought and disagreed with the allegations.
Steve Anderson is an Australian crypto enthusiast. He is a specialist in management and trading for over 5 years. Steve has worked as a crypto trader, he loves learning about decentralisation, understanding the true potential of the blockchain.