According to a recent report by Bloomberg, the United States Securities and Exchange Commission (SEC) is presently looking into the dealings of some crypto lenders including Celsius Network, Gemini, and Voyager Digital.
Crypto Lenders Under The Spotlight of The SEC
The report highlights how SEC is now wary of the high-yield crypto lending products offered by some of these lenders. And whether or not, crypto lending services should be considered as securities to ascertain if they must be registered with the commission.
Firstly, the SEC is concerned about how the crypto lending firms are able to offer such high yields. For instance, Celsius promises big rewards if you let it hold your crypto. But regulators now want to understand what exactly it is, that the firm is doing with your coins.
Also, the interest rates that most crypto lending services offer, range between 3% to 18%. But with traditional banks’ savings accounts, the best offers are less than 0.1%.
Another angle to look at the situation is investor protection. Usually, savings accounts from traditional financial institutions are insured by the Federal Deposit Insurance Corporation FDIC. This means that investor funds are well protected against theft and bank failure.
But according to the SEC, crypto lenders usually lend customers’ digital assets to other investors, which is a legitimate cause for concern.
It would be interesting to note that at this moment, no accusations have been levied by SEC against any of the firms. At least not yet.
Not New To Regulatory Crackdowns
Meanwhile, crypto lending services are not exactly new to being a subject of regulatory scrutiny. In fact, they have continuously faced regulatory crackdowns in the U.S. since last September.
Recall that state regulators from Texas and New Jersey both issued cease and desist orders against Celsius Network.
The New York Attorney General (NYAG) office also cracked down on BlockFi and Celsius in October, ordering them to shut down their services. The NYAG alleged wrongdoing and issued a cease and desist order against the platforms.
In fact, American leading crypto exchange Coinbase, also had to shutdown its crypto yield product even before launch because of SEC’s lawsuit threat.
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