Crypto industry executives have said they suspect rival firms in the traditional finance industry, such as large banks, are responsible for pushing regulators.
In a September “Ask Me Anything” event with customers, Celsius Network Chief Executive Officer Alex Mashinsky said he believed bank executives had called the SEC and state regulators to complain about crypto lending firms.
“We have to work twice as hard because these guys have the largest lobbyists working for them at both at the state and the federal level,” Mashinsky said. “We’ll prevail. The fight is over all the money in the world, right?”
The latest battle is over crypto lending firms, which sometimes offer depositors double-digit yields. The firms say they’re able to do that by lending the deposits at even higher rates to institutional investors, who need to borrow crypto for their own trading.
Regulators believe many of the companies should have registered their products as securities, subjecting them to additional disclosure and oversight. The products are sometimes marketed as alternatives to bank savings accounts, and some regulators said investors might be fooled into thinking they were taking little risk.
The dispute came to a head earlier this month when Coinbase CEO Brian Armstrong in a series of tweets accused the SEC of “sketchy behavior” and disputed that Coinbase’s proposed accounts were securities.
Gensler said during a Senate Banking hearing last week that Coinbase hasn’t registered with the SEC even though “dozens of tokens” on its exchange might be securities. A Coinbase spokesperson said the firm doesn’t believe it offers any securities on its platform.
Crypto executives say they’re frustrated that regulators are threatening to sue them, rather than giving them guidance on how they can stay within the law.
Last week, BlockFi CEO Zac Prince at the SALT Conference in New York said the SEC and other regulators needed to give his industry clarity on what’s allowed. Five states have already taken action against his firm, accusing it of offering unregistered securities to their residents. Prince at the conference said federal guidance is needed, rather than state actions.
Even some firms with similar products that did file with the SEC crave more agency guidance. Circle Internet Financial Inc., for example, offers high-yield deposit accounts to corporate clients and notified the SEC under an exemption geared toward accredited investors, said CEO Jeremy Allaire.