Crypto lending firms Celsius, Gemini, and Voyager, are under the scrutiny of the U.S. Securities and Exchange Commission. SEC targets the three crypto exchanges because they practice paying interest on crypto token deposits.
Bloomberg reports that SEC’s examination of Celsius, Gemini, and Voyager is part of a larger probe into businesses that offer lending services and allow customers to earn interest from depositing security tokens. According to SEC, such products should be categorized as securities.
Higher Interests from Crypto Lending Firms Raises Concerns
The three exchanges pay customers interest rates higher than most bank savings accounts. While traditional banks offer an interest of 0.1%, these crypto lending firms provide between 3% to 18% interest rates. With states such as New Jersey and Texas, SEC has whistle blown that investors need protection from such offerings.
The Federal Deposit Insurance Corporation usually insures traditional bank savings accounts. When an issue of bank failure or theft arises, the clients are protected from the risk of losing their funds.
However, the crypto lending firms are not insured, and they lend investors’ crypto token deposits to other investors. With their attractive prices, investors are at high risk of losing their funds.
All Three are cooperating with SEC’s Investigation
Gemini spokeswoman Carolyn Vadino confirmed that SEC has reached out to the exchange regarding its high yield products. Vadino continued that Gemini was cooperating with the industry-wide inquiry.
Celsius, on the other hand, was not so forthcoming with information. The exchanges spokeswoman Bethany Davis said all discussions with regulators were confidential. Mike Legg, a spokesman from Voyager, stated that the regulatory environment has been evolving rapidly. It was, therefore, a normal thing for SEC and other regulatory bodies to engage in such discussions with financial services firms.
SEC has not officially commented on the investigation. The regulatory body has not formally accused crypto lending firms Celsius, Gemini, and Voyager of wrongdoing. What is happening is simply an inquiry.
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