{"id":6601,"date":"2021-09-20T20:53:15","date_gmt":"2021-09-20T20:53:15","guid":{"rendered":"https:\/\/newmoneyreview.com\/?p=6601"},"modified":"2021-10-11T09:26:29","modified_gmt":"2021-10-11T09:26:29","slug":"us-cracks-down-on-crypto-lending","status":"publish","type":"post","link":"https:\/\/newmoneyreview.com\/index.php\/2021\/09\/20\/us-cracks-down-on-crypto-lending\/","title":{"rendered":"US cracks down on crypto lending"},"content":{"rendered":"

US regulators are cracking down aggressively on the trading platforms that offer mouth-watering dollar-denominated interest rates on loans of crypto assets.<\/p>\n

On Friday, Coinbase announced<\/a> that it was discontinuing a plan to offer up to 50 times the prevailing rate on bank deposit accounts to clients offering to lend USDC, a dollar-denominated \u2018stablecoin\u2019 that promises to maintain a $1 value.<\/p>\n

USDC has a market value of just under $30bn and has grown in size more than tenfold in the last year. Tether, the largest dollar-denominated stablecoin, has $69bn in assets.<\/p>\n

USDC was first issued by a company called Circle in 2018. Circle, together with Coinbase, were founding members of a consortium called Centre, which oversees the stablecoin\u2019s development.<\/p>\n

In its pre-launch advertising Coinbase was promising interest rates of 4 percent on loans of USDC, while US bank savings accounts currently pay an average of 0.06 percent.<\/p>\n

But earlier this month Coinbase disclosed it had received notice from the US securities market regulator, the Securities and Exchange Commission (SEC) about potential legal action regarding its proposed lending programme, called LEND.<\/p>\n

In a series of tweets, Coinbase\u2019s CEO, Brian Armstrong, accused the SEC of \u2018really sketchy behaviour\u2019<\/a> for having insisted that LEND qualified as a security under US law.<\/p>\n

The regulator had argued that the loan programme should be subject to US securities laws, which govern all investment contracts sold to the public, Coinbase said.<\/p>\n

During recent weeks, US state financial regulators have pursued two other crypto lending platforms\u2014BlockFi and Celsius network\u2014that are already in place. These pay even higher deposit rates than those promised by Coinbase for its now-ditched LEND scheme.<\/p>\n

At least five US states have targeted New Jersey-based BlockFi\u2019s interest-paying crypto offering. BlockFi promises up to 8 percent annual yield on clients\u2019 pledges of cryptoassets, including various dollar-denominated stablecoins and other cryptocurrencies.<\/p>\n

And Texas and New Jersey state securities regulators have accused Celsius network of failing to comply with local securities laws.<\/p>\n

On Friday, the Texas State Securities Board said<\/a> it would hold a hearing in February 2022 to decide whether to issue a cease and desist order against Celsius in the state.<\/p>\n

Celsius had more than $24 billion in \u2018community assets\u2019 at the beginning of September, according to Bloomberg. The crypto lending platform promises interest rates of nearly 9 percent for deposits of dollar-denominated stablecoins, such as Tether and USDC.<\/p>\n

US regulators\u2019 crackdown on the crypto lending sector comes as a growing share of global credit is supplied by non-banks.<\/p>\n

Earlier today the Bank for International Settlements (BIS) released new research<\/a> showing that banks\u2019 share of international lending business had declined steadily since the 2008 financial crisis, with loans by non-banks like asset managers taking up the slack.<\/p>\n

The growth in such non-bank lending means that regulators have to take extra precautions to ensure adequate liquidity and transparency measures are in place, the BIS said.<\/p>\n

With the dramatic rise of new crypto lending programmes, regulators are under even more pressure to ensure a level playing field between different types of financial intermediary.<\/p>\n

Sign up here<\/a> for the New Money Review newsletter<\/em><\/p>\n

Click here<\/a> for a full list of episodes of the New Money Review podcast: the future of money in 30 minutes<\/em><\/p>\n

Related content from\u00a0New Money Review<\/em><\/span><\/p>\n

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A new age of private money<\/a><\/p>\n

Keeping money public<\/a><\/p>\n

Is BlockFi a weak point for bitcoin?<\/a><\/p>\n","protected":false},"excerpt":{"rendered":"

US regulators are cracking down aggressively on the trading platforms that offer mouth-watering dollar-denominated interest rates on loans of crypto assets. 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