US Senator Links Celsius Investor Losses To SEC Regulatory Policy

US Senate Banking Committee Vice Chairman Pat Toomey said that investors in crypto lending products had been hurt by the SEC’s reluctance to clarify the regulation of the digital asset industry.

In a letter to SEC chief Gary Gensler, the politician stressed that the agency’s “regulation through enforcement” approach is a wayward and ineffective approach to consumer protection. The department’s measures hinder innovation and contribute to the financial losses of investors, Toomey said.

He recalled that in recent weeks, several companies providing crypto lending services, which were likely under the remit of the SEC, have gone bankrupt.

“These firms often promised huge, seemingly unsustainable interest rates to depositors, and at least one of them allegedly engaged in risky practices. One of these businesses, Celsius , reportedly managed about $12 billion in assets, using the funds of thousands of Americans to provide loans to organizations making short-term crypto investments,” the senator wrote.

The politician said that Celsius clients’ funds had been frozen since mid-June, and the integrity of their deposits is questionable.

“Had the SEC responded to calls for clarity on how it would apply existing securities laws to new digital assets and services, things could be different,” Toomey said.

In this case, companies could adjust the products accordingly and prevent the loss of investors, he is sure.

“Instead, the SEC chooses to enforce regulation by selectively enforcing its opaque stance on which digital assets and services are securities,” the senator said.

He cited insider trading charges filed by the Commission against a former employee of the Coinbase exchange and two of his accomplices. In this case, the SEC allegedly had a clear idea of ​​why it considered the nine digital assets in the claim to be securities but did not publicly disclose its opinion. At the same time, at least 25 tokens are listed in the charges brought against the defendants by the Ministry of Justice, Toomey noted.

He asked Gensler to provide written answers to several questions regarding interactions with Celsius, Voyager, and BlockFi, possible recommendations on their products, and some other aspects of relations with the industry. 

Toomey also inquired about the “distinctive features” of nine tokens from the SEC lawsuit against an ex-Coinbase employee and 16 other assets.

Previously, the CFTC pointed to the SEC’s non-transparent approach to classifying tokens as “digital securities” in this case and criticized the regulatory agency’s enforcement method.