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After Targeting BlockFi, State Regulators Now Eye Celsius

Earlier this year, crypto lending platform BlockFi faced the heat of state regulators in New Jersey, Texas and Alabama. Since then other states have also joined in. This week Celsius is now facing the same ceasefire and demands from all three states that BlockFi first faced.

Let’s take a look at what we know so far, and what this could mean for DeFi going forward.

Regulatory reach: what Celsius is it facing

It is quickly becoming clear that Celsius is joining the battle to confront regulators in the same way that BlockFi is. On Friday, Texas officials ordered a ceasefire against Celsius. The filing would require Celsius to show the state why it should not be ordered to stop offering its products to state residents. Like BlockFi, Celsius is accused of offering unregistered securities to residents. The Texas hearing is scheduled for February 24.

Alabama and New Jersey both issued similar actions on the same day. New Jersey ordered the platform to stop offering select products by November 1. In a similar action, Alabama demanded that the platform show why it should not be barred from offering products within 28 days.

A representative for Celsius told Bloomberg that the firm is “disappointed by these actions and completely disagrees with allegations that Celsius has not complied with the law,” adding that there will be no immediate changes to services for platform customers. Will do

Celsius' native platform token, CEL, offers more aggressive yield rates - but is not currently offered in the U.S. | Source: CEL-USD on TradingView.com

Related Reading | Analyst Puts New Bitcoin ATH for October as Stablecoins Start Pumping in BTC

DeFi’s tough fight

The news comes just weeks after Coinbase released a blog post about an impending lawsuit from the SEC, assuming that Coinbase moved forward with its anticipated Lend product. Coinbase has since applied for a National Futures Association license. It remains to be seen what happens with Lend Products and the SEC.

Meanwhile, Celsius has quietly become a giant in DeFi. The platform reportedly holds over $24B in “community assets”, making it the largest – if not the largest – crypto lender and interest-account provider. What the action means for Celsius customers in the respective states remains to be seen, and BlockFi may eventually become a case study. However, from what we’ve seen from BlockFi and regulators so far, it doesn’t do much to set a precedent. So far, in a handful of states, only new account registrations have been restricted. BlockFi has had no impact on customers prior to regulatory action.

To this day, consumers have been largely left in the dark as to what kind of effects are likely to be seen here going forward. In this situation, optimists can say that these actions could lead to regulation that establishes good practices and frameworks for crypto lending platforms. However, a pessimistic outlook would be to believe that more states may join the ranks and DeFi may face increasing pressure from regulators given the impact on traditional banking institutions.

Either way, it seems hard to suggest that consumer protection through these individual state regulators is at the fore. Where it goes from here remains to be seen.

Related Reading | While the broader crypto market holds its collective breath, whales are loading up on bitcoin.

Featured image from Pexels, Charts from TradingView.com

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