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The U.S. Securities and Exchange Commission (SEC) is going after some of the biggest digital currency lending companies in the world, claiming they may be violating securities regulations. The watchdog is probing Celsius Network, Voyager Digital, and Gemini Trust which have been offering these products, just months after it went after Coinbase (NASDAQ: COIN) for attempting to launch a similar product.

Digital currency lending has grown to become a multi-billion-dollar sector over the past few years. Celsius, BlockFi, Gemini, Voyager, and more take digital currency deposits and pay interest to the clients, just like a bank does. However, unlike banks that pay less than 0.1%, these platforms pay anything from 3% to 18%. And now, regulators are taking notice.

According to sources from within the SEC, the watchdog is conducting a broader probe on digital currency lenders but is initially focusing on Celsius, Voyager, and Gemini which is the exchange owned by the Winklevoss twins.

Speaking to Bloomberg, the sources claimed that the SEC is concerned about whether the companies should have registered their products as securities, bringing them under its purview. Of particular concern is the high rates that these firms fork out, all while evading the stringent regulations that financial institutions are subjected to, said the sources, whose identity was concealed as they aren’t allowed to speak publicly.

The SEC has not charged any of the companies yet, the sources clarified.

The three all claimed they were confident the matter would be solved amicably soon and that they would continue with their lucrative operations.

“We are one of many companies the SEC has reached out to regarding crypto yield products. We are cooperating voluntarily with this industry-wide inquiry,” Carolyn Vadino, a spokesperson for Gemini, said.

Voyager is just as confident, saying that as the regulatory environment continues to evolve, telling Bloomberg, “it’s normal for financial services companies, digital asset related or otherwise, to be in ongoing dialog with regulators.”

While the regulatory scrutiny may be new for the other two, Celsius Network has previously found itself in a similar situation. The company has been at odds with regulators in half a dozen states in the U.S., all of whom accuse it of offering unregistered securities, alongside the other big player BlockFi.

Kentucky, Texas, and Alabama have all started some form of regulatory action against Celsius. The New York Attorney General (NYAG) has also gone after the company, alongside Nexo. In an unrelated incident, CFO Yarom Shalem was arrested in Israel.

A New Jersey regulator said at the time, “If you sell securities in New Jersey, you need to comply with New Jersey’s investor-protection laws. Companies dealing in cryptocurrencies are not immune from oversight.”

Despite the history of regulatory disputes, Celsius is unworried and believes all the issues will be solved soon.

“All discussions with regulators are confidential. We always have, and will continue to, work with regulators in the U.S. and globally to operate in full compliance with the law,” said spokesperson Bethany Davis on the latest issues.

Celsius has been based in the U.K. since it launched in February 2017, but it announced last year that it was moving to the United States. At the time, it claimed that regulatory uncertainty for digital currency companies in the U.K. was the biggest factor.

But despite its troubles, the company has continued to grow and boasts of about $20 billion in assets under management. In October, it raised $400 million at a $3 billion valuation, with Canada’s second-largest pension fund, Caisse de dépôt et placement du Québec leading the funding round.

Follow CoinGeek’s Crypto Crime Cartel series, which delves into the stream of groups—a from BitMEX to BinanceBitcoin.comBlockstreamShapeShiftCoinbaseRippleEthereum,
FTX and Tether—who have co-opted the digital asset revolution and turned the industry into a minefield for naïve (and even experienced) players in the market.

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