SEC Probes Crypto Firms for Offering Lending Products

The United States Securities and Exchange Commission (SEC) is scrutinizing three crypto companies, Celsius Network, Voyager Digital and Gemini Trust, as a part of a broader investigation against cryptocurrency lending platforms, Bloomberg reported on Wednesday.

Citing anonymous sources, the report detailed that the investigation of the regulator is focused on checking if the crypto lending companies should register their offerings as securities. However, it did not accuse the companies of any wrongdoings or bring charges yet.

Crypto lending companies mostly operate like banks: they take cryptocurrencies of customers as deposits and offer interest on them. These lending companies then loan these deposited cryptocurrencies to institutions to cover their crypto trading positions.

Though the crypto lending companies are facing a federal investigation now, several US state regulators have already moved against them for violation of state securities laws. New Jersey, Texas, Alabama, Kentucky and a few other states have brought enforcement actions against Celsius and BlockFi and even threatened to block their businesses.

Companies Cooperating with Regulator

The SEC did not officially confirm its latest probe, but all of the three companies have said that they are cooperating with the regulator.

“We are one of many companies the SEC has reached out to regarding crypto yield products,” a Gemini spokesperson told the publication. “We are cooperating voluntarily with this industry-wide inquiry.”

“All discussions with regulators are confidential,” Bethany Davis at Celsius added. “We always have, and will continue to, work with regulators in the U.S. and globally to operate in full compliance with the law.”

But, the SEC’s hostility against crypto lending products is not new. The regulator earlier flagged Coinbase’s about-to-be-launched crypto lending, and the exchange was forced to scrape it eventually.