Arizona, the U.S. financial regulator, has warned about cryptocurrency interest-bearing account. “Some companies may materially overstate the degree to which their collateral practices protect their ability to pay investors the stated return,” the regulator said.
The State Regulator is Warned About Crypto Interest-Bearing Savings Accounts
The Arizona Corporation Commission issued an investor alert this week, warning about “digital asset financial services companies that offer interest-bearing crypto-asset accounts.”
The regulator explained: “With crypto-interest accounts, customers lend crypto assets to the company and, in exchange, receive interest paid in crypto assets.” The Arizona Corporation Commission elaborated:
Due to the current downturn in crypto markets, which was highlighted by Voyager Digital’s bankruptcy filings, certain companies prevent account holders from withdrawing or transferring funds.
The securities regulator cautioned investors that “some crypto-interest account providers may not have adequately disclosed the risks that customers face when they deposit crypto assets onto these platforms,” adding:
Some businesses may exaggerate the extent to which their collateral policies protect them from paying investors their stated returns.
Recent action was taken by the Commission against Blockfi Lending LLC. The investigation found certain crypto-interest account were not registered securities.
It was revealed by the regulator that they are investigating whether any other providers of crypto-interest accounts violate its laws.
Voyager Digital, a crypto lender and Celsius Network filed for bankruptcy protection. The Department of Financial Regulation of the U.S. State of Vermont said it “believes Celsius is deeply insolvent and lacks the assets and liquidity to honor its obligations to account holders and other creditors.”
Voyager CEO Stephen Ehrlich explained why his company filed for bankruptcy: “The prolonged volatility and contagion in the crypto markets over the past few months, and the default of Three Arrows Capital (‘3AC’) on a loan from the company’s subsidiary, Voyager Digital, LLC, require us to take deliberate and decisive action now.”
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