BlockFi, a cryptocurrency lending platform, came under fire earlier this year from state regulators in New Jersey, Texas, and Alabama. Since then, additional states have entered the fold. Celsius is now facing similar cease and desist actions from all three of the states to which BlockFi was initially subjected.
Celsius is rapidly establishing a presence in the fight against regulators in the same way as BlockFi has. Texas officials issued a cease and desist order against Celsius on Friday. Celsius will be required to demonstrate to the state why it should not be required to cease supplying its products to state residents. Celsius, like BlockFi, is accused of marketing unregistered securities to residents. The hearing in Texas is set for February 24.
Alabama and New Jersey also appear to have taken identical moves on the same day. By November 1, New Jersey ordered the platform to discontinue offering certain products. Alabama, in a similar case, ordered that the platform demonstrates within 28 days why it should not be prohibited from supplying products.
Celsius informed Bloomberg that it is “disappointed these actions have been brought and categorically denies the allegations that Celsius has violated the law,” adding that the platform will not make any immediate adjustments to its customer services.
Devi’s Uphill Struggle
The disclosure comes just a few weeks after Coinbase published a blog post warning of a possible SEC action, assuming Coinbase proceeds with its projected Lend program. Coinbase has since sought a license with the National Futures Association. What happens with the Lend product and SEC remains to be seen.
Meanwhile, Celsius has quietly grown into a Defi behemoth. According to reports, the platform currently owns more than $24 billion in “community assets,” making it one of the largest – if not THE largest – cryptocurrency lender and interest-account providers. What this implies for Celsius customers in the affected states has to be seen, and BlockFi may become a case study in the future. However, what we have seen thus far from BlockFi and regulators does not set a precedent. Thus far, only new account registration has been prohibited in a handful of states. Prior to the regulatory action, customers on BlockFi experienced no impact.
To date, customers have been mostly in the dark about the potential consequences of this move. The optimist in this situation might argue that these activities will result in regulation establishing best practices and regulatory frameworks for cryptocurrency lending services. Pessimists, on the other hand, might anticipate that more states will join and that Defi will face more regulatory pressure as a result of the impact on traditional financial institutions.
In either case, it appears difficult to argue that these separate state regulators prioritize consumer protection. Where it goes from here is unknown.
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