BlockFi, a crypto lending platform, came under fire from state regulators in New Jersey, Texas, and Alabama earlier this year. Since then, additional states have entered the fold. After having targeted BlockFi, now state regulators targeting Celsius. Let’s take a look at what we’ve learned so far and what it could mean for DeFi in the future.
Regulators Have Arrived: What Degrees Celsius Are We Facing?
Celsius is swiftly demonstrating that it is joining the fight against regulators in the same way that BlockFi has. Texas officials issued a cease-and-desist order against Celsius on Friday. Celsius will be required to demonstrate to the state why it should not be obliged to stop selling its products to citizens of the state. Celsius, like BlockFi, has been accused of selling unregistered securities to homeowners. The hearing in Texas is set for February 24.
On the same day, Alabama and New Jersey appear to have taken similar moves. By November 1, New Jersey has ordered the platform to stop selling certain products. Alabama, in a similar move, ordered that the platform demonstrate why it should not be barred from selling products within 28 days.
According to Bloomberg, Celsius is “disappointed these proceedings have been brought” and “wholeheartedly disagrees with the assertions being made that Celsius has not complied with the law,” adding that the platform will not make any immediate adjustments to its services for clients.
DeFi’s Uphill Struggle
The news comes just a few weeks after Coinbase published a blog post about an impending SEC lawsuit, assuming Coinbase went ahead with its much-anticipated Lend program. Since then, Coinbase has applied for a license from the National Futures Association. What happens with the Lend product and SEC remains to be seen.
Meanwhile, Celsius has quietly grown into a DeFi behemoth. According to reports, the platform houses more than $24 billion in “community assets,” making it one of the largest crypto lenders and interest-account providers. It’s unclear what this implies for Celsius consumers in those jurisdictions who want to take action, and BlockFi could become a case study in the future.
However, what we’ve seen so far from BlockFi and regulators isn’t exactly setting a precedent. Only new account registration has been banned in a handful of states thus far. Customers who used BlockFi before the regulatory action was unaffected.
Consumers have been mainly kept in the dark about what kind of consequences could be expected in the future. In this context, the optimist might argue that these activities would lead to regulation establishing best practices and guidelines for crypto lending sites. However, pessimists might assume that other states will enter the fray and that DeFi will face more regulatory pressure as a result of its influence on traditional financial institutions.
In any case, it’s difficult to argue that these particular state authorities are putting consumer protection first. It remains to be seen where it leads from here.
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