Crypto Lending crackdown by New York throws a new curve ball

Karthik Subramanian

New York has ordered a couple of crypto lending platforms to shut down their operations and cease any kind of activities and it is also reliably learnt that notices were sent to three other such platforms to provide information on the kind of operations that they carry out.

The names of the platforms were not revealed but the order was released by the New York Attorney General Letitia James and the platforms were given a timeframe of 10 days to cease their activities that are related to the selling of any securities and offering of securities and commodities as well. This brings back the ghost of the ongoing clash between Ripple and SEC on whether XRP needs to be classified as a security and this just goes to show that until full and proper regulations are framed surrounding crypto, just fickle actions would continue to haunt the crypto market in the US as no one seems to be yet clear on what is allowed and what isn’t.

“My office is responsible for ensuring industry players do not take advantage of unsuspecting investors,” James said. “We’ve already taken action against several crypto platforms and coins that engaged in fraud or that illegally operated in New York.”

This also reminds the crypto community about the order from the SEC which had forced Coinbase to shut down its plans for a lending platform which points to the fact that as of this time, the regulators in the US do not view crypto lending in a favorable light and so it would be advisable for such platforms in the US to shut shop and lay low for a while till the dust settles down. The move follows the settlements that were reached with Tether and Bitfinex over the last few days and it should also be noted that the NY AG had won a court order to shut down the Coinseed exchange for pursuing activities contrary to the law and defrauding various investors.

This brings back the crypto community to square one as the definition of a security in the US is still up in the air with the SEC and other authorities still believing that many of the cryptos fail the Howey test for security classification and so the crypto industry would have to await further clarifications and direction from the authorities before they can press on with their growth within the US.

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