On September 17, New Jersey's securities regulator ordered Celsius, the crypto lending platform and network behind the altcoin project CEL, to cease its interest account offerings in the state. That same day, the Texas State Securities Board announced that a hearing would be held in February to consider whether Celsius would make a similar move to halt its bids in the state.
New Jersey-based crypto lending firm BlockFi has faced scrutiny from government securities regulators all summer for its high-interest crypto savings accounts. Coinbase has also been warned by the US Securities and Exchange Commission that it will face lawsuits if it launches its high-yield Lending program. Now, Celsius, also in New Jersey, is receiving warnings from regulators.
The problem is Celsius's crypto interest accounts. Customers register on the platform and deposit their cryptocurrencies in Celsius, which lends them; In return, customers receive much higher interest rates than those found in traditional bank savings accounts. The network advertises returns of up to 17 percent, although rates are updated weekly and vary by asset. Currently, stablecoins like Tether and USDC receive 8.88 percent, while Ethereum and Bitcoin collect around 5-6 percent per year.
Additionally, Texas and New Jersey say Celsius's API partner program has increased the reach of such accounts, as "Celsius API Partners can then offer and sell unregistered Celsius Earnings Accounts to their customers," according to the PTSD. None of these have been approved by either state, as Celsius has not registered with institutions or the SEC to sell securities, which are tradable investment products, Texas and New Jersey regulators said.
Many, including the SEC and some lawyers specializing in cryptocurrencies, consider "yield" products to be securities because they function as unsecured bonds that the borrower agrees to repay someone without collateral.