California Regulator Probes Crypto Lenders

The California Department of Financial Protection and Innovation (DFPI), which looks into operations of state-licensed financial institutions, will be investigating whether crypto-asset companies that suspended withdrawals and transfers have broken the law.

It’s looking into a few crypto companies in particular, including Voyager Digital and Celsius, Yahoo Finance reported Wednesday (July 13).

The investigation focuses on “multiple companies” which offer interest-bearing crypto-asset accounts, along with service providers that “may not have adequately disclosed risks customers face when they deposit crypto-assets onto [lenders’] platforms.”

The DFPI has said in the past that crypto interest account providers aren’t governed by the same rules and protections as banks and credit unions. That concerns the DFPI because some platforms have prevented customers from withdrawing and transferring between accounts.

Because of that, the DFPI has said consumers should exercise high levels of caution before they respond to solicitation offering investments or finance services. The DFPI has also said that some crypto account providers were trading in unregistered securities: The state issued two cease and desist orders to Voyager and BlockFi.

The report notes that Celsius has had withdrawals and transfers frozen since June 12 because of liquidity concerns — and rumors have said the company management has debated whether they should file for bankruptcy.

Voyager Digital has recently filed for Chapter 11 bankruptcy, which PYMNTS reported has shaken the confidence of even veteran crypto investors.

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