The objection was filed due to language perceived as intentionally vague in Celsius’ request.
Two weeks ago, Celsius filed a motion asking for approval to sell stablecoins currently in its possession.
At the time, a preliminary investigation did not find any reasons to deny the request outright – even though the cash generated by the sale would be used to fund Celsius’ operations, not pay back creditors. Further deliberation on the matter was scheduled for a hearing on the 6th of October.
Texas Regulators Object to the Request’s Wording
However, Texan regulators have decided to inform the court of their misgivings even ahead of time. On the 29th of September, the Texas State Security Board (SSB), the Texas Department of Banking (DOB), and the Attorney General representing the state in the ongoing bankruptcy case filed an objection to the proposal, citing concerns over the language used in it.
According to Texan authorities, Celsius has not seen fit to explain precisely how many stablecoins the company has on hand. Furthermore, “the Debtors seek to sell and/or exchange any stablecoin, whether currently held or received in the future, on a post-petition basis consistent with prepetition practices.”
In other words, Celsius’ request would allow the sale of stablecoins using the same business practices used up until now. Considering those prepetition practices seem to have led to meltdown and subsequent bankruptcy filing, it’s easy to see why Texan authorities may not see fit to grant Celsius carte blanche in this matter.
Stablecoins Are Still Crypto Assets
Another objection put forth by the Texas SSB is that despite being pegged to the dollar, stablecoins are still crypto assets and, as such, should be considered part of the debtor’s estate and, therefore, unfit for sale.
“Texas objects to any language in the proposed order that would allow use of the funds in question to pay intercompany transfers from Debtors to non-Debtor affiliates or related obligations, and asserts that any proceeds from the Debtors’ sale of stablecoin should be held for the benefit of creditors.”
Additionally, the Texas SSB states that Celsius has still not registered with the watchdog for a license allowing it to either exchange money or sell securities. This bars the lender from selling stablecoins from any Texas-based business entity, regardless of whether stablecoins are to be considered cryptocurrency assets or assets interchangeable with fiat USD.
Citing the reasons above, the state of Texas requests that Celsius’ motion be denied – or at the very least changed to ensure the proceeds of the sale would be used to pay off creditors instead of funding “operations.”