Due to the fall in the crypto market and the absence of regulatory protections, cryptocurrency lending firms and their clients are facing huge financial risks. These firms had offered loans at very interest rates to boost their business, while they were paying hefty rates on deposits. Celsius Network, one of the big crypto lending firms, had last month banned transactions.

Columbia University professor Omid Malekan said, “The Celsius network is going to go bankrupt soon.” According to an AFP report, some other crypto lending firms, such as CoinFlex and Babel Finance, have also blocked withdrawals. These firms had allowed clients to deposit cryptocurrencies and get interests on them or borrow as collateral. Many clients of these firms are facing difficulties with the restrictions on transactions. They also fear a loss of their funds.

Regulators are investigating the decision to ban transactions by clients of The Celsius Network. Celsius had said that due to the poor state of the crypto market, it was prohibiting withdrawals and transfers between accounts. The decision to ban transactions by the firm, which has headquarters in the US, is being investigated by some regulators, including the Texas State Security Board. The US Securities and Exchange Commission (SEC) has also sought information from the firm in this regard. Joseph Borg, director of the Alabama Securities Commission, said: “I am concerned that the firm’s clients, including retail investors, may need to redeem their assets, but they can do so. This may increase their financial difficulties.”

Many firms in this segment are cutting down on their workforce to reduce costs. Coinbase, one of the biggest crypto exchanges, also recently decided to reduce its workforce by 18 percent. The firm, which has headquarters in the US, says it has taken this step to reduce costs in this difficult time of the industry. The decision is expected to retrench more than 1,000 employees of the exchange.