The California Department of Financial Protection and Innovation (DFPI) is investigating several crypto lending firms that provide consumers with interest-bearing crypto-asset accounts.
The statement reads that “Due to market conditions, some of these companies are preventing customers from withdrawing from and transferring between their accounts.”
Amid the crypto winter, Celsius paused withdrawals and transfers initially. It was followed by Babel Finance, Voyager Digital, CoinFLEX, etc as a chain reaction due to the market conditions.
Among these Voyager Digital has already filed for bankruptcy, while Celsius is busy paying off its debts while simultaneously preparing to file for bankruptcy, as per reports.
The DFPI alerts investors and consumers in California to the possibility that many providers of crypto interest accounts have not appropriately disclosed the risks that users assume when they deposit crypto assets onto these platforms.
The providers of crypto interest accounts are not subject to the same regulations and safeguards as banks and credit unions, which are obligated to offer deposit insurance, the post states.
The California DFPI has conducted investigations and taken action against various crypto firms, including BlockFi and Voyager Digital. The department determined that certain crypto interest accounts from those platforms were unregistered securities.
The Californian regulator is also looking into whether other crypto-interest account providers are breaking any laws under its jurisdiction.
“Consumers are encouraged to exercise extreme caution before responding to any solicitation offering investment or financial services,” the DFPI warns.
Yesterday, another U.S. state financial regulator, Vermont DFR claimed that Celsius Network is ‘deeply insolvent’ and encouraged the network’s investors to “proceed with caution.” They also confirmed that Celsius is in talks with insolvency counsel.
