State Regulators Charge Nexo For Unregistered Product

Eight U.S. state regulators have charged cryptocurrency lender Nexo Group, saying it has failed to register its Earn Interest Product, a Reuters report said.

It comes with authorities cracking down on digital asset platforms which have been dealing with a crypto winter.

The regulators from New York, California, Kentucky, Maryland, Oklahoma, South Carolina, Washington and Vermont all filed administrative actions against the company on the grounds that its accounts should be qualified as securities and registered that way.

Clothilde Hewlett, commissioner with The California Department of Financial Protection and Innovation (DFPI), said the agency is looking seriously into unregistered interest-bearing cryptocurrency accounts.

“These crypto interest accounts are securities and are subject to investor protections under the law, including adequate disclosure of the risk involved,” he said. “Collectively, these actions protect investors while ensuring that California remains an ideal setting for responsible financial innovation.”

Meanwhile, New York Attorney General Letitia James said cryptocurrency platforms “are not exceptional; they must register to operate just like other investment platforms.”

She said Nexo has to “stop its unlawful operations and take necessary action to protect its investors.”

BlockFi agreed last February to pay $100 million in a settlement with the U.S. SEC over similar grounds. After that, digital asset platforms have looked for more clarity on how the products are governed, saying it’s currently unclear.

“Since the SEC guidance on earn products in February 2022, Nexo has voluntarily ceased the onboarding of new U.S. clients for our Earn Interest Product as well as stopped the product for new balances for existing clients,” the company said.

The question of how to deal with the crypto registrations has loomed over U.S. lawmakers’ talks for months, with SEC chair Gary Gensler saying in July that he was looking to get crypto trading platforms to register with the SEC.

Read more: Gensler Aims to Get Crypto Exchanges to Register With SEC

Gensler said he wanted agency staff to work with crypto exchanges to be regulated like securities were.

“Look, there’s no reason to treat the crypto market differently just because a different technology is used,” he said.

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