At Propelify, Alex Mashinsky of Celsius Describes the Regulatory Minefield for Cryptocurrency Lending and Trading Companies

New Jersey securities regulators last month ordered cryptocurrency lender Celsius Network (Hoboken) to stop offering customers interest- paying accounts.

The state Bureau of Securities issued a cease-and-desist order in September against Celsius, alleging that it had been funding its cryptocurrency-lending operations and proprietary trading at least partly through the sale of unregistered securities, in violation of state securities law, said Acting Attorney General Andrew J. Bruck on Sept. 17, at the time the order was announced.

But Alex Mashinsky, cofounder and CEO of Celsius, denied any wrongdoing during a talk at the Propelify Innovation Festival, in Hoboken on Oct. 6, with CNBC senior reporter Jade Scipioni as moderator.

Mashinsky questioned the allegations and motives of the regulators.

“They asked us to show them what we were doing. So, we showed them what we were doing. We showed them it’s legal, and showed them that no government has ever given banks a monopoly,” he said.

“But they just created a monopoly by buying all of the community banks, all of the trusts, all of the small guys. And then there’s no competition.

“And the fees are more than the interest? And you’re still making a deposit with your next paycheck? You still give it to them. So, we can’t blame them. We have to blame us. It’s an abusive relationship.”

Bruck, in his Sept. 17 statement, said that the alleged unlawful sales had raised at least $14 billion for Celsius, which is facing similar orders in Alabama, Texas and Kentucky.

“Financial companies operating in the cryptocurrency marketplace are on notice,” Bruck said at the time. “If you sell securities in New Jersey, you need to comply with New Jersey’s investor-protection laws. Companies dealing in cryptocurrencies are not immune from oversight.”

During Propelify, Scipioni asked Mashinsky, “The problem right now is there’s no federal regulation, right?” 

Mashinsky responded, “We’ve been following all the laws since 2017. We filed with FinCEN [U.S. Financial Crimes Enforcement Network], we filed with the SEC [U.S. Securities and Exchange Commission]. We do everything you’re supposed to do,” he said.

“The issue is that the banks are whining and crying and complaining,” Mashinsky said.

“The regulators are saying, ‘Let me dig into this and find something these guys have done wrong, so we can shut them down.’ That’s what’s happening.”

Scipioni asked, “So you’re telling me the way it is. But you want more regulation, correct?” 

Mashinsky answered, “I don’t want more regulation, I want clarity of regulation. I think all of us are asking. It’s not just me, right?

“We are managing $25 billion. If we were a bank, we would be the 80th-largest bank in the United States now. We pay $860 million in interest. That would make us one of the top 10 banks in interest payments in the United States,” Mashinsky said.

“The Federal Reserve tells us that the value of money is zero, but the markets, the DeFi market [a virtual currency market], the CFI market [a financial trading market], decentralized finance and centralized finance all tell us that the value of money is 8.8 percent,” he said.

“How can it be that banks make all-time record profits, and interest rates are zero? These people are stealing from you, taking money out of your pocket.”

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