Celsius Network, one of the world’s largest digital asset lending firms, has updated its risk disclosure, including regulatory risks for the first time amid scrutiny by U.S. state and federal watchdogs.
In its updated Risk Disclosure document, Celsius included the usual risks, which it had listed previously, including digital asset price volatility, the lack of legal tender status, irreversibility of digital asset transactions, the lack of regulation in most parts of the world, and even the false perception of stablecoin backing for some projects (such as Tether).
However, it added new risks, one of which is regulatory risks.
“As with other digital assets, CEL is susceptible to a wide variety of risks, including the risk of theft, loss of keys, irreversibility of transactions, failure of the underlying blockchain, and regulatory risks,” the disclosure noted.
This is the first time Celsius has included regulatory risks in its disclosure, but the inclusion is not a surprise at all. The company, and its peers, including Voyager Digital, Nexo, and BlockFi, have been the focus of several state securities regulators, led by New Jersey’s Bureau of Securities, who claim they have been offering securities thinly veiled as interest-bearing accounts.
As CoinGeek reported, over half a dozen state regulators have gone after these companies, with some issuing cease-and-desist orders and demanding that they stop operating in their jurisdictions, while others have requested them to prove that their products are not securities.
The latest victim is Voyager Digital, with eight state watchdogs descending on the firm. Some like New Jersey and Oklahoma issued the firm a cease-and-desist order to stop serving residents, while some like Texas and Alabama issued a show cause order demanding that Voyager defends its products in a set time or risk a cease-and-desist order.
This was barely a month since the U.S. Securities and Exchange Commission had settled for $100 million with BlockFi. The firm also pledged to pursue registration for its lending product.
In Celsius’ case, regulatory scrutiny has taken its toll, with the London-based digital asset lender announcing two weeks ago that it would limit its interest-bearing accounts to accredited investors in the United States. This includes those with a net worth of at least a million dollars or with an annual income of at least $200,000.
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