Struggling Bitcoin Service Provider (BTC) BlockFi Faces Cease-and-Desist Order

According to the latest Forbes report from Monday, July 19, BlockFi – the multibillion-dollar financial services provider Bitcoin (BTC) – has received a cease and desist order from the New Jersey Bureau of Securities.

The operating Bureau of Securities may ask BlockFi to shut down interest-bearing accounts. The same was confirmed by BlockFi CEO Zac Prince in a series of tweets. He notes that BlockFi continues to remain fully operational for its customers and that 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.

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– Zac Prince (@BlockFiZac) July 20, 2021

However, the order calls on BlockFi to stop accepting new BIA customers residing in New Jersey starting this week from July 22. Stating his clients about BlockFi’s own operations, Zac Prince Remarks:

“BlockFi is engaged in an ongoing dialogue with regulators to help them understand our products, which we believe to be legal and appropriate for crypto market participants. The BIA is not a security, so we disagree with the action of the New Jersey Bureau of Securities.

We will continue to engage with all relevant authorities to protect the interests of our customers and ensure that our products remain available. “

Founded in 2017, BlockFi has raised more than $ 500 million in private funding. He currently sets a valuation of $ 5 billion.

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Crypto lending platform could be in trouble

As Forbes reports, if the New Jersey Attorney General signs the order and takes further action, it could be an important warning for crypto lending platforms that have grown exponentially over the past year.

The unpublished project, as Forbes noted, funded and traded its crypto lending operations through the sale of unregistered securities. If this is true, it means violating the securities laws of the regulator.

Based on the crypto and the size of the deposit, BlockFi offers interest rates between 0.25% and 8.5%. On the other hand, the 10-year Treasury yield offers only 1.19% while savings accounts offer as little as 0.06%. The regulator’s project notes that platforms like BlockFi and other DeFi do not offer FDIC or SIPC insurance as is the case with traditional banks. Acting Attorney General Andrew J. Bruck noted:

“Our rules are simple: If you sell securities in New Jersey, you must comply with New Jersey securities laws. No one gets a free pass just because they operate in the rapidly evolving cryptocurrency market. Our Securities Office will be following this issue closely as we work to protect investors. “

It will be interesting to see how the regulator continues and what that means for the crypto lending industry.

About the Author

Bhushan is passionate about FinTech and has a good flair for understanding financial markets. His interest in economics and finance draws his attention to the new emerging markets of Blockchain technology and cryptocurrency. He is continually in a learning process and remains motivated by sharing his acquired knowledge. In his spare time, he reads thrillers and occasionally explores his culinary skills.