Saturday, July 24, 2021

3 states have cracked down on crypto lender BlockFi as the company’s interest accounts draw scrutiny

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In this photo illustration the cryptocurrency exchange trading platform Blockfi logo seen displayed on a smartphone with a flag of the United States in the background.
  • Three US states have said cryptocurrency platform BlockFi’s Interest Accounts may be a security under state regulation.
  • New Jersey, Alabama, and Texas said the crypto platform did not register its BlockFi Interest Accounts with regulators.
  • BlockFi CEO Zac Prince says that the interest-bearing accounts are lawful.
  • Sign up here for our daily newsletter, 10 Things Before the Opening Bell.

Three US states have said cryptocurrency platform BlockFi may have violated securities law by offering its interest-bearing accounts within their jurisdictions.

All three states – New Jersey, Alabama, and Texas – said the cryptocurrency platform did not register its BlockFi Interest Accounts, or BIAs, with the respective state regulators, and that they may be unregistered securities offerings.

BIA allows clients to deposit their cryptocurrencies and earn interest, depending on how much and which types of assets are deposited.

On July 20, New Jersey issued a summary cease and desist order banning BlockFi from selling unregistered securities through its BIAs and to stop accepting new BIAs in the state. The state said this product violated the state’s securities law.

BlockFi CEO Zac Prince in a tweet revealed that New Jersey, where his firm is based, gave them a week’s worth of extension until July 29 before the ban takes effect.

The next day, Alabama alleged that BlockFi was selling unregistered securities to partly fund crypto lending.

On July 22, Texas scheduled a hearing for October 13 to determine whether it will issue a cease and desist order against BlockFi. The state said it notified the cryptocurrency platform as early as April that the company may be in violation of state securities regulations.

Prince has maintained that BIAs are lawful.

Source: Business Insider


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