In Brief:
- Celsius has been scrutinized by state securities of New Jersey and Texas.
- Celsius is running an Unregistered Reward Program.
- Celsius is accused of illegally funding their lending operations.
Celsius network has been served a Cease and Desist Order notice from the Texas Security Board. Earlier, the New Jersey government had also charged Celsius with a similar case.
The hearing of the case will happen via a video conference before the State Office of Administrative Hearings at 9 am on February 14th, 2022.
According to the notice served to Celisus by the Texas security board, they are illegally funding their lending operations, proprietary trading, and other revenue-generating activities through the sale of unregistered securities in the form of cryptocurrency interest-earning accounts.
Celsius Network’s “Earn Rewards” program is an unregistered cryptocurrency interest-earning account. According to the document, Under the law of Texas Celius network is Violating the following rules and regulations.
THE LACK OF REGISTRATION AND PUBLIC PROTECTIONS
- Celsius is not licensed as a Money Service Business in Texas to conduct currency exchange or money transmission activities.
- Celsius is not licensed with the United States Securities and Exchange Commission.
- Additionally, they are not registered with the Texas State Securities Board to offer or sell securities in Texas.
- The Celsius Earn Interest-Bearing Accounts are also not protected by SIPC, FDIC, or NCUA.
As per the court document of New Jersey, the Celsius network had violated similar rules. The conclusion in the New jersey hearing is that
- Effective from nov 1 ,2021 any one from Celsius or its user must Cease and desist the reward program in New jersey.
- This does not include the Celsius networks reward program, also Known as Rewards.
Public’s Response to the Cease and Desist Order on Celsius
Users on Celsius were disappointed that regulators were cracking down on the loan platform, but speculated that the decision could be due to them wanting to lay down clearer standards for companies entering the market.
Celsius’ crypto interest accounts are at a problem. Clients sign up for the site and deposit bitcoins with Celsius, which subsequently lends them out at interest rates significantly higher than those offered by typical bank savings accounts.
Returns of up to 17% are advertised on the network, while rates are updated regularly and vary by an asset. Stablecoins like Tether and USDC currently have an annual interest rate of 8.88%, whereas Ethereum and Bitcoin have an annual interest rate of 5 to 6%.
Since June 2020, when it declared $1 billion in digital assets, its holdings have increased by more than 2,300 percent. As of June 9, Celsius Network managed more than $344 million in assets for more than 9,000 residents and small companies in Texas. In July this year, it invested $54 million in Core scientific.
Celsius has more than $24 billion in digital assets as of Sept. 3, according to the Texas filing, making it one of the largest decentralised finance companies.
