Policy & Regulation

New York cracks down on crypto lending services

  • New York Attorney General Letitia James published cease-and-desist orders for two cryptocurrency lending companies
  • Three other companies were ordered to provide information about their ownership and handling of users' deposits
  • There have been numerous state regulators cracking down on crypto lending platforms

New York Attorney General Letitia James published cease-and-desist orders for two crypto lending companies. Three other companies were ordered to provide information about their ownership and handling of users’ deposits.

Office of the Attorney General redacted the names of the firms under scrutiny

The Office of the Attorney General (OAG) redacted the names of the firms under investigation. What is notable is that the cease-and-desist letter retained the name “Nexo Letter,” while the request for information was referred to as the “Celsius Letter” when it was first published, although the OAG later corrected its files. Nexo’s cease-and-desist letter states that the OAG considers the company’s failure to register as a broker-dealer a violation of the Martin Act. The letter aimed at Celsius gave the company until November 1 to provide information about its ownership structure, investment strategy, and how it holds custody of crypto deposits.

Meanwhile, the Attorney asked the other three companies to provide more information about their operations, such as what they do with the cryptocurrencies deposited on their platforms. Details should include all the wallet addresses and entities that provide custody. The attorney general also wanted to know if the platforms accept fiat currency or Tether as collateral.

Numerous state regulators cracking down on crypto lending platforms

She also went more into detail about the state’s Martin Act, which contains a broad list of instruments that should be declared securities. These include “any stocks, bonds, notes … or negotiable documents of title, or foreign currency orders, calls, or options therefore hereinafter called security or securities.”

There have been numerous state regulators cracking down on crypto lending platforms. This summer, BlockFi was the first to receive a cease-and-desist order from state securities regulators, followed by Celsius. The Securities and Exchange Commission has yet to crack down on existing platforms openly, but Chairman Gary Gensler has hinted that they are on the commission’s radar.

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