Regulators Object to Celsius’ Stablecoin Sale Request

State regulators from Texas and Vermont have objected to the request of bankrupt crypto lender Celsius to sell off its stablecoin holdings to help fund its operations, court documents filed on 29 September show.

The company, which is going through a Chapter 11 bankruptcy, asked the U.S. Bankruptcy Court earlier this month for a permission to sell all of its stablecoin holdings — which are equivalent to around $23 million — in order to generate liquidity to help “fund the Debtors’ operations”. The request, however, drew objections from regulators in Texas and Vermont, who in separate motions argued Celsius could use the capital to resume operations in violation to state laws.

The Texas Department of Banking, Texas State Securities Board, and the Vermont Department of Financial Regulation have all expressed concerns regarding the matter, pointing to the fact Celsius is under investigation in “more than 40 states”. The main issue with Celsius’ request, according to the three agencies, is that the company had failed to provide sufficient details about what it would do with the funds from the sale. Vermont’s regulator said in its filing:

“It is not at all clear what the debtors intend to do with the proceeds of any such sales, whether the relief requested extends to Stablecoin-denominated assets such as retail loans to consumers, and the degree to which Debtors’ use of sale proceeds will be supervised by the Court.”

The two agencies from Texas added that the stablecoin sale will only “muddy the already opaque waters that are the Debtors’ cryptocurrency assets”, and slow the investigation into the company. If the request is approved, however, the regulators recommend Celsius is limited to using the proceeds “for the benefit of creditors of the bankruptcy estate”. A hearing to decide the outcome of Celsius’ request has been scheduled for 6 October.