coinfomania.com
The United States Securities and Exchange Commission (SEC) is working to register crypto lending firms under regulatory purview if they operate like investment companies, according to SEC chair Gary Gensler.
SEC to Bring Crypto Lenders Under Securities Laws
Speaking to CNBC Squawk in an interview on Thursday, Gensler noted that the Commission is working with the industry to “properly register these firms under the securities laws.”
“We have focused on this area because many of these firms like BlockFi that settled may well be investment companies taking hundreds of thousands or millions of customers’ funds, pooling it together, and then re-lending it while offering pretty high returns. Sounds a little like an investment company, or a bank, you might say,” he said.
Gensler further noted that traditional financial institutions will be allowed to add crypto options to their portfolios for clients, but the risk of the assets needs to be disclosed to their clients.
Regulators Intensify Focus on Crypto Lenders
Gensler’s statement came at a time when the crypto market is facing major turmoil with the prices of crypto assets dropping significantly. This has caused a liquidity crisis among crypto lending firms, resulting in the suspension of withdrawal services.
Major crypto lenders including Celsius Network and Voyager Digital have filed for Chapter 11 bankruptcy protection in New York to carry out their reorganization plans weeks after suspending withdrawals on their platforms, leaving customers’ assets frozen.
These events have increased regulators’ focus on the sector as they seek to protect investors against future risks. According to reports, regulators in five U.S. states including Texas, Alabama, Kentucky, New Jersey, and Washington are currently investigating Celsius over the withdrawal freeze.
Coinfomania reported last week that the California Department of Financial Protection and Innovation (DFPI) is “actively investigating” companies offering crypto interest accounts nationwide.
The regulator said it was more focused on crypto interested account providers that have frozen customers’ assets on their platforms.
In another development, the Bank of England (BoE) recently called for tougher regulations on crypto, noting that the recent drop in crypto assets exposed vulnerabilities in the market.