Celsius, a cryptocurrency lending platform that held an ICO in March last year, is feeling the heat from regulators over the status of its native CEL token which has resulted in it suspending use of the token by U.S. investors. In a tale that is becoming more and more prevalent within the crypto space, Celsius announced that they were forced to halt usage of their token by American customers following instruction from “legal counsel.”
Interest Payments Get Celsius into Hot Water
As a crypto lending firm, Celsius wasn’t in any regulatory trouble, but it is the use of their native CEL token that has the potential to catch the eye of regulators. Celsius generates funds through its lending business and redistributes it as interest to loan providers. The interest it pays out includes the option of being paid in CEL tokens, which offers “lower interest rates on coin and fiat loans, higher earned interests on non-CEL deposits, (and) a cashback rewards program.” Going by an email sent to members it appears that Celsius are now worried that they might have crossed a regulatory line:
Celsius is clearly worried that paying out interest might look like a security to US regulators, but by halting payments in this manner they may also now face some litigation for breach of contract. They also cannot be oblivious to the fact that stopping payments now will not necessarily remedy any potential previous misstep. The move could have a profound impact on Celsius’ business model, as some 40% of their customers are thought to be from the U.S. American Celsius investors will therefore be waiting with interest, and potentially a little fear, at the state of their investment while Celsius works out its next steps.
A Widespread Problem
The Celsius case once again highlights the confusion and fear that has gripped crypto entities since the authorities began clamping down on the industry, especially seeing as the regulations are unclear and have been for some time. This has left CEOs and company lawyers with one of two options – try their best to interpret existing laws and results of court cases to find a clear pathway through the minefield, or, in the case or Kik, fight back.