Neither the author, Kingsley Alo, nor this website, The Tokenist, provide financial advice. Please consult our website policies before making any financial decisions.
DeFi platform Celsius has announced that US investors cannot earn rewards on their platform unless they are accredited. This is part of broader changes the platform is implementing to its Earn product following discussions with regulators.
Consequently, starting April 15, new deposits from US users will be transferred from the crypto lender to custody accounts. However, these accounts would not earn interest unless the account holders are deemed to be accredited investors. Existing deposits, on the other hand, continue to earn regular interest. Now the rates on offer are up to 18%, with stablecoins yielding more than 7% returns.
Celsius joins its peers BlockFi and Nexo to face regulatory pressures on credit products
The latest development sees crypto lending platform Celsius joining Nexo and BlockFi in imposing restrictions on US traders using its platform. In 2021, New York Attorney General Letitia James announced cease and desist letters to two cryptocurrency lending firms. The companies affected were Nexo and Celsius, although this was revealed inadvertently.
Subsequently, in February, Nexo announced a series of policy changes for US customers. The decision came after further scrutiny by the Securities and Exchange Commission (SEC) of its products and services in the crypto lending space.
The timing of the policy change could not be more striking. It happened the same week that BlockFi settled $100 million with the SEC and state securities regulators. It also came after regulators forced Coinbase to shut down its lending program despite close ties to law enforcement.
To continue participating in Celsius Profit, investors must have a minimum annual income of $200,000 or a net worth greater than $1 million.
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Crypto continues to face regulatory backlash in the US
The entire crypto industry is facing a tough stance from regulators in the US. SEC Chairman Gary Gensler has consistently highlighted the DeFi lending sector as an area under federal officials’ scrutiny. This could be another reason why users are not flocking to these high-yield investment vehicles.
Congress has even questioned the SEC’s tough stance. They have accused the regulator of violating US laws and overloading the crypto industry. The SEC has said the ball is in the court of congress over adequate regulation to guide the burgeoning industry.
Despite the somewhat distant stance of both arms of government, Congress has made efforts to engage in dialogue and understand the sector. It has held several congressional hearings on stablecoins and a fact-finding tour on digital assets. However, it has yet to create a clear regulatory framework, putting US investors at a disadvantage.
The new policy changes for citizens imply that they cannot participate in these high-yield investment vehicles. This leaves them disadvantaged and left behind while their non-US peers continue to benefit from these high returns. However, the position of regulators is somewhat understandable, they have a responsibility to protect investors and DeFi carries significant risks.
Actions by regulators show they are unequivocally opposed to any lending product, especially crypto. This will remain so until proper DeFi regulations are put in place for platforms offering these services. If the necessary framework is not put in place, there is a chance that the US will be left behind by other countries that fully embrace crypto innovation.
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About the author
Alo Kingsley is a finance writer with over 4 years of experience in the blockchain and cryptocurrency space. Alo first discovered Bitcoin in 2016 and has been passionate about it ever since, particularly the various ways blockchain can help Africa and the world at large. He aims to give the crypto space a more geographically balanced narrative as it evolves. His articles have been published in Cointelegraph, Beincrypto, and Forkast.news, among others.
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