SEC is investigating three crypto lending platforms

abdelaziz Fathi

The US Securities and Exchange Commission is investigating Celsius Network, Voyager Digital, and Gemini Trust, as a part of a broader scrutiny against cryptocurrency lending platforms.

According to a Bloomberg report, the regulator did not accuse the three crypto firms of any wrongdoings or brought charges yet. Rather, the SEC is checking if their DeFi and lending products should be registered as securities.

“We are one of many companies the SEC has reached out to regarding crypto yield products,” a Gemini spokesperson told Bloomberg. “We are cooperating voluntarily with this industry-wide inquiry. We always have, and will continue to, work with regulators in the U.S. and globally to operate in full compliance with the law. All discussions with regulators are confidential,” Celsius’ Bethany Davis added.

Earlier in September, the US regulators signaled a big change in policing cryptocurrencies and the growing Defi sector after they blocked Coinbase from launching a new crypto lending product. The SEC officials have increasingly been talking about a need to crack down on these products, which are essentially unregistered interest-bearing accounts, the agency claims.

The use cases presented by major players reflect that the lending trends are shifting to a reliance on digital assets to support business’ operations rather than for only betting on the short term price moves. Specifically, recent data shows substantial interest from the institutional players to borrow in order to facilitate a specific strategy such as for shorting, arbitrage, or working capital purposes.

SEC’s probe into DeFi products comes amid heightened regulatory interest into cryptocurrencies and the digital asset market. Chair Gary Gensler called on Congress to give the agency more authority to better police crypto trading and lending platforms, which pay customers rates higher than most bank savings accounts.

The New York Attorney General’s Office also ordered two cryptocurrency lending platforms, which were reportedly Nexo and Celsius, to stop operating in the state. She also sent three other platforms letters with questions about their operations.

The state authority directed Nexo and another crypto lender, Celsius, to cease operations in October, citing failure to register the business in New York and performing unlawful activities. Last summer, Celsius and BlockFi received cease-and-desist orders from other state securities regulators.

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