Celsius incident has U.S. regulators on high alert for cryptocurrency systemic risks
This article comes fromThe Block, Original Author: Kollen Post
Odaily Translator | Nian Yin Si Tang
Summary:
This article comes from
, Original Author: Kollen Post
Odaily Translator | Nian Yin Si Tang
Summary:Announce- Policymakers in Washington are watching the situation at cryptocurrency lending firm Celsius, which froze withdrawals over the weekend.
- US SEC Chairman Gary Gensler briefly talked about the Celsius incident during his recent media appearances.
All eyes are on cryptocurrency lending firm Celsius’ “sudden” freeze on withdrawals, including lawmakers and regulators who were already skeptical of cryptocurrencies.
Last Sunday night, Celsius
The freeze appears to have locked up as much as $11 billion in assets tied to many vectors in the broader cryptocurrency market.
Observers have been continuing to pay attention to the impact of this on the overall market. Just a month after the Terra debacle, policymakers in Washington, D.C., are getting ready to look for more case studies of crypto companies failing.
Celsius bills itself as a crypto-native bank, offering users high-interest savings accounts and low-interest (while also overcollateralized) loans relative to traditional banks. It never obtained FDIC insurance on these accounts, and in addition to making substantial mortgage loans to users, it appears to have engaged in riskier speculative investments than the bank might allow.Last summer, the SEC and state securities regulators made clear several times that they considered these lending products to be unregistered securities, not bank accounts exempt from that classification. During the same period, the US SEC was still ahead of Coinbase's attempt to launch Lend, a lending platform.order it to close
"The SEC did a very good job of policing the Coinbase and BlockFi related initiatives, but they did a terrible job with Celsius," said John Reed Stark, who led the SEC's Office of Internet Enforcement until 2009.
Stark currently teaches at Duke University Law School and has maintained an online critique of the crypto industry. He expressed shock that the SEC did not issue a temporary restraining order against Celsius.
In an interview with the Wall Street Journal on Tuesday, SEC Chairman Gary Gensler
Mentioned Celsius
, and cited it as a risky example of cryptocurrency custodians not segregating client assets.
“A lot of crypto lending platforms actually have your assets in some joint omnibus account,” Gensler said. Telling you, 'You can't withdraw money. At least not now'."
Gensler compared the incident to the meme stock incident in January 2021, when Robinhood also locked customer funds. He praised the protections Robinhood has put in place and wants the same from crypto companies: “We should be able to bring the same protections to crypto exchanges and lending and make sure they persist, but right now these companies are Didn't do that."
In addition, he said that the SEC is discussing specific plans to bring six platforms, including cryptocurrency exchanges, under its jurisdiction.
In an interview with The Block in September, Celsius CEO Alex Mashinsky said: “We’ve followed the rules from the beginning.” Referring to the SEC, he added:
The impact on retail investors is a central issue. As in the case of Terra, regulators in Washington are currently eyeing other branches of the crypto market. Harm to retail investors is the main concern for Celsius.expressTo many members of Congress, the notion of a single crypto company failing isn't necessarily catastrophic. However, if crypto companies start to fall one after another like dominoes and devastate the broader market, the industry could come under the lens of “systemic risk.”
Such a label could invite oversight from the Financial Stability Oversight Council, which has a broad watchdog body (albeit rarely used).
Celsius’ relationship with Tether, the largest stablecoin operator, is particularly attracting regulators’ attention in this regard. As users redeem USDT, its supply has slumped, though Tether has denied Celsius has had an impact on its own business.
On June 13th, Tether officially released the news
