Celsius Phasing Out High-Interest Crypto Accounts for Non-Accredited US Investors

U.S. and state regulators have been taking aim at crypto rewards platforms such as BlockFi and Celsius for the last year. In a direct blow, the latter has agreed to stop paying rewards to non-accredited (read: financially well-off) U.S. investors on any new deposits starting April 15.

Accredited investors will still be eligible for rewards, as will non-accredited customers' assets that are already held by Celsius. The new rules don't apply to non-U.S. customers.

The change will dent Celsius' business model, which works like this: Customers store their crypto assets with the company and earn interest (i.e., rewards) in the form of more coins and tokens. For instance, Celsius currently offers over 7% annual returns on stablecoins such as USDC and Tether, 5.5% for Solana and over 3% for wrapped Bitcoin. Celsius then loans those pooled tokens out at higher rates to borrowers.

Several state securities regulators, including Texas, New Jersey, and Alabama, accused Celsius and competitor BlockFi of offering unregistered securities. The U.S. Securities and Exchange Commission and other regulators view high-interest accounts as securities, just like unsecured bonds—with borrowers repaying a loan without putting up collateral. (As for why securities regulators would care, it's because consumers could get shafted if borrowers default.)

In February, BlockFi settled with the SEC and 32 states for $100 million over failing to register its BlockFi Interest Accounts. While it neither admitted nor denied the SEC's charges, BlockFi did scuttle the accounts for U.S. users, saying it planned to create an SEC-registered product that would "allow clients to earn interest on their crypto assets."

Now, Celsius is going a similar route—albeit without a $100 million settlement—and citing "ongoing discussions with United States regulators" as the impetus behind changing its Earn product so that only accredited investors can take home interest.

It says that on Friday, April 15, Celsius will release a new "Custody" product in licensed U.S. jurisdictions: "Custody will serve as the centerpiece of your home for crypto, providing a secure way to navigate across Celsius’ products, including store, access, borrow, spend, earn and grow."

Yes, earn and grow—but by how much?