As per the latest report from Forbes on Monday, July 19, BlockFi – the multi-billion dollar Bitcoin (BTC) financial services provider – has received a cease and desist order from the New Jersey Bureau of Securities.
The Bureau of Securities operating is likely to ask BlockFi to stop interest-bearing accounts. The same has been confirmed by BlockFi CEO Zac Prince in a series of tweets. He notes that BlockFi continues to remain fully operational to its clients and all aspects of the platform “are accessible in New Jersey”.
Late Monday evening BlockFi received an order from the New Jersey Bureau of Securities regarding BlockFi Interest Account (BIA) operations in the State of New Jersey.
— Zac Prince (@BlockFiZac) July 20, 2021
However, the order calls BlockFi to stop accepting new BIA clients residing in New Jersey starting ahead of this week from July 22. Affirming his clients about BlockFi’s clean operations, Zac Prince notes:
“BlockFi is engaged in an ongoing dialogue with regulators to help them understand our products, which we believe are lawful and appropriate for crypto market participants. BIA is not a security, and we therefore disagree with the action by the New Jersey Bureau of Securities.
We will continue to engage with all relevant authorities to protect our clients’ interests and ensure that our products remain available.”
Founded in 2017, BlockFi has raised over $500 million in private funding. It currently pegs a valuation of $5 billion.
Crypto Lending Platform Could Be In Trouble
As Forbes reports, if the New Jersey Attorney General signs the order and proceeds with further action, it could be a big warning to the crypto lending platforms which have seen exponential growth over the last year.
The unpublished draft, as noted by Forbes, has been funding and trading its crypto lending operations through the sale of unregistered securities. If true, it means violating the securities laws of the regulator.
Based on the crypto and deposit size, BlockFi offers interest rates anywhere between 0.25% to 8.5%. On the other hand, the 10-year Treasury Yield offers only 1.19% while the saving accounts offer as low as 0.06%. The draft from the regulator notes that platforms like BlockFi and other DeFi ones do not offer FDIC or SIPC insurance as available with traditional banks. The Acting Attorney General Andrew J. Bruck noted:
“Our rules are simple: if you sell securities in New Jersey, you need to comply with New Jersey’s securities laws. No one gets a free pass simply because they’re operating in the fast-evolving cryptocurrency market. Our Bureau of Securities will be monitoring this issue closely as we work to protect investors.”
It will be interesting to see how the regulator proceeds further and what it means ahead for the crypto lending industry.