Billion-Dollar Bitcoin Lending Platform BlockFi Receives Notice of Cease and Desist
The Bureau of Securities from the New Jersey Office of the Attorney General has issued a cease and desist order to the U.S.-based Bitcoin financial services provider BlockFi.
The order to BlockFi typically bans the firm from offering any new interest-bearing accounts. It is an unprecedented action against any crypto lending platform and is perceived as how states could deal with other firms and upcoming assets.
The regulator claims that BlockFi has been funding and aiding its operations noticeably by selling unregistered securities, directly violating federal securities laws.
The current attorney general Andrew J. Bruck commented, "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."
Crypto Lending platforms like BlockFi have come to limelight due to the significant interest rates they offer. BlockFi offers anywhere between 0.25% and 8.5% depending on the crypto asset and deposit size, along with exceptional rewards provided on credit card transactions.
According to the Federal Deposit Insurance Corporation (FDIC), the nationwide average for interest in savings accounts is as little as 0.06%. However, 10-Year Treasury notes give a return of 1.19%.
BlockFi CEO Zac Prince wrote on a string of tweets. "We remain fully operational for our existing clients in New Jersey. All aspects of the BlockFi platform continue to be accessible to our clients in New Jersey. The order calls for BlockFi to stop accepting new BIA (BlockFi Interest Account) clients residing in New Jersey beginning July 22, 2021."
However, the BlockFi CEO has said that they are currently engaged in a dialogue with the securities regulator to help them understand their products. BlockFi calls itself the “lawful and appropriate” participants of the crypto industry.
He further added: “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”.
BlockFi is a unicorn startup, has raised $508.7M in funding over 13 rounds. Its latest funding was raised on Mar 11, 2021, from a Series D round.