Continued regulatory scrutiny forces Defi yield platform Celsius to discontinue its Earn product for non-accredited US investors following Nexo and BlockFi's steps.
DeFi platform Celsius has announced that US investors would be unable to earn rewards on its platform unless they are accredited. This is part of sweeping changes that the platform is implementing to its Earn product following conversations with regulators.
Consequently, starting from Apr. 15, new deposits from US users will be transferred to custody accounts by the crypto lender. However, these accounts would not be paid interest unless the account owners are considered accredited investors.
On the other hand, existing deposits will continue to earn regular interest. Now, the rates on offer are as high as 18%, with stablecoins giving more than 7% returns.
Celsius Joins its Competition, BlockFi And Nexo, In Facing Regulatory Pressure Over Lending Products
The latest development sees the crypto lending platform Celsius join Nexo and BlockFi in placing restrictions on US traders using their 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, Nexo in February announced a set of policy changes for US customers. The decision came after further scrutiny by the Securities and Exchange Commission (SEC) over its products and services in the crypto lending sector.
The timing of the policy change could not be any more conspicuous. It happened in the same week BlockFi settled with the SEC and state securities regulators to the tune of $100 million. It also came after regulators forced Coinbase (NASDAQ:COIN) to shut down its lending program despite close ties with law enforcement agencies.
To continue participating in the Celsius earn, investors must have a minimum annual income of $200,000 or a net worth of over $1 million.
Crypto Continues To Face Regulatory Backlash In The US
The entire crypto industry faces a harsh stance from regulatory bodies in the US. SEC chair Gary Gensler has continuously highlighted the DeFi lending sector as one area that federal officials scrutinize. This may be another reason users are not flocking to these high-yield investment vehicles.
Congress has even questioned the tough stance of the SEC. They have accused the regulatory body of violating US laws and overburdening the crypto industry. The SEC has said the ball is in Congress’ court over proper regulations to guide the nascent industry.
Despite the somewhat standoffish stance between both government arms, Congress has made efforts to dialogue and understand the sector. It has held several congressional hearings on stablecoins and a fact-finding mission on digital assets. However, it is still yet to set up a clear regulatory framework, thus leaving US investors disadvantaged.
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 counterparts continue to enjoy these high returns. However, the position of regulators is somewhat understandable; they have a responsibility to protect investors, and DeFi poses significant risks.
The actions of the regulators show that they are clearly against any lending product, especially in crypto. This will remain the case until proper DeFi regulations govern platforms offering these services are enacted.
If the necessary framework isn’t created, the US stands a chance of being left behind by other countries that fully embrace the innovation of crypto.