By Hannah Lang

(Reuters] – Cryptocurrency businesses said they were still unsure of U.S. regulations governing products allowing customers to earn interest instead of trading, several months after such an interest bearing product received a $100 million penalty from a federal regulator.

BlockFi, a New Jersey-based crypto company, agreed to $100 million with the U.S. Securities and Exchange Commission and authorities in Washington. The settlement was a historic one. BlockFi claimed that its interest bearing product is a security and therefore should have been registered.

Many digital asset firms that offer such products still believe the rules are not clear and are unsure when to register. These offerings are becoming more and more popular, and many have been launched in the past year.

Many companies have attempted to organize interest-bearing product structures to avoid registration with the SEC. It is a lengthy process and requires reporting and ongoing disclosure. This effort could lead to a conflict with the SEC as the agency increases its scrutiny of crypto.

BlockFi intends to launch an alternative yield product. The company said that the registration would take place first. According to the company, the SEC stated that the agreement should serve as a guideline for other businesses.

“Our resolution with the SEC is a key step to achieving regulatory clarity for not only BlockFi but the crypto ecosystem as a whole, which is necessary for long-term mass adoption of crypto financial services,” a BlockFi spokesperson said in a statement.

The industry leaders suggested that the SEC define security, rather than using enforcement measures to establish boundaries.

Nicholas Losurdo of Goodwin, who was a partner in the firm and was previously counsel to Elad Roisman (former SEC Commissioner) said that SEC registration for crypto products “is not always a path other people can take for different circumstances.” “The better way would be for the SEC to actually just articulate a clear message of what it expects.”

As securities are not like other assets, such as commodities or stocks, they must be strictly regulated. They also require investors to receive detailed disclosures about potential risks. While the Securities Act of 1933 defined security and many experts rely upon two cases from the U.S. Supreme Court to help determine if an investment product can be considered a security.

Although the SEC didn’t respond to a request for comments, Gary Gensler, Chair of SEC has stated that most cryptocurrencycurrencies are securities according to those definitions. Many within the industry are not in agreement, and cite other interpretations.

Gemini is a cryptocurrency exchange that offers an interest-bearing product. It was approved by New York State Department of Financial Services. Noah Perlman (chief operating officer) at Gemini stated that the approval differentiates them from BlockFi and indicates that they did not suffer any adverse effects.

“You’ve got an industry that wants to work with regulators, and yet you’ve got regulators who are not in the habit of giving advisory opinions,” he added.

State regulators which ordered BlockFi to stop offering its product in September issued similar orders to Celsius Network. The order called the Celsius Earn product an unregistered security by Celsius Network. While Alex Mashinsky didn’t say whether Celsius would sign the product, he said to Reuters in early October that he did not fear the SEC would sue Celsius as it is a much more conservative company than BlockFi.

He also said BlockFi “didn’t hurt anyone” with its product.

Celsius stopped receiving new deposits from U.S. retail investors since that interview. Additional requests for comment were not received by Celsius.

Richard Levin (chair of Nelson Mullins’ fintech and regulatory practice), said that several crypto-company executives are looking at limiting the offerings they offer to be exempt from the SEC registration rules.

Circle Internet Financial offers only its yield instruments for institutional investors, however

A yield product that pays dividends to customers is likely to be considered a security. Circle Yield’s chief strategist officer Dante Disparte stated that Circle agreed with this concept when it was structuring.

Following threats by the SEC in September, Coinbase (NASDAQ), America’s largest crypto exchange, abandoned plans for a new crypto-lending product.

Some cryptocurrency companies stated that they are being cautious due to the SEC’s strict stance.

Kraken, for example, would like to offer an interest-bearing product but the company is wary since the SEC has not provided guidance, said Marco Santori, the company’s chief legal officer.

Bitstamp is a New York-based crypto exchange. It hopes to provide a yield product for institutional investors in the United States, however, it may need to be licensed and approved by New York regulators.

Bobby Zagotta (CEO of Bitstamp USA) stated that some crypto-players in the U.S. are in serious trouble for how they have managed credit and lending. We don’t want the U.S. to get in trouble, so we will be very diligent.”