Cryptocurrency companies said they remain unsure of U.S. regulations governing products that allow customers to earn interest on holdings instead of trading them, months after such an interest-bearing product drew a $100 million fine from a federal regulator and state governments.
Most firms have tried to structure the interest-bearing products to avoid the need to register them with the SEC, a process that takes time and entails ongoing disclosure and reporting obligations. That effort might set them up for a clash with the agency as it increases scrutiny of the crypto industry.
Industry executives said the SEC should clearly define what constitutes a security rather than using enforcement actions to set boundaries. The SEC did not respond a request for comment, but SEC Chair Gary Gensler has said most cryptocurencies are securities as defined in those cases. Many in the industry disagree, citing other interpretations of the law.
The state regulators that ordered BlockFi to cease offering its product issued a similar order in September to crypto company Celsius Network, calling its Celsius Earn product an unregistered security. CEO Alex Mashinsky did not say whether Celsius would register the product, but told Reuters early this month he was not concerned the SEC would sue because Celsius is a"much more conservative company than BlockFi".
"If a yield product is paying dividends to consumers, it's very likely going to be treated like a security. We agreed with that as we were structuring Circle Yield," said Dante Disparte, chief strategy officer at Circle.
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