This article has been updated to show that the CEO of BlockFi confirmed in a series of tweets, the company received a cease and desist letter from the New Jersey attorney general’s office.
According to a draft press release from the New Jersey Attorney General’s Office, the Securities Office plans to issue a summary cease and desist order to BlockFi, the multi-billion dollar bitcoin financial services platform based in the United States. New Jersey, in order to stop offering interest accounts.
If signed, this action could be the first of its kind against crypto lending platforms that have seen rapid growth during the recent crypto bull run. Since its inception in 2017, BlockFi has raised $ 500 million in private funding and has a valuation of $ 5 billion.
The undated and unpublished draft argues that BlockFi funded and facilitated its cryptocurrency lending and trading operations at least in part through the sale of unregistered securities in alleged violation of relevant securities laws. The New Jersey-based company offers interest rates between 0.25% and 8.5% depending on crypto asset and deposit size, in addition to a trading platform and credit card. Bitcoin Rewards. In comparison, according to the FDIC, the national average interest on savings accounts is 0.06%, while 10-year treasury bills earn 1.19%.
The draft statement then highlights how decentralized funding platforms, known in the industry as DeFi, don’t offer FDIC or SIPC insurance like traditional banks and brokerage houses. However, while BlockFi offers savings and lending platforms similar to those that run on decentralized ledgers, such as Uniswap or Compound, it is a centralized business.
In a comment provided in Acting Attorney General Andrew J. Bruck’s paper, âOur 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. “
While Bitcoin and Ether are widely viewed as commodities based on comments and actions from the SEC and CFTC, other assets supported by BlockFi such as Chainlink and Uniswap are less clear. If the cease-and-desist is ultimately signed, it could set a precedent for how states might deal with other assets yet to be classified.
When contacted for comment, BlockFi CEO Zac Prince said Forbes, “The company is not aware of any imminent action with the New Jersey attorney general’s office. We have an excellent relationship with New Jersey regulators and other state and federal regulators. ”
After the story was published, Prince tweeted. “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 … We remain fully operational for our existing customers in New Jersey.” He also noted that the order requires BlockFi to stop accepting new BIA customers residing in New Jersey from July 22, 2021.