Three US States Going After BlockFi In Regulatory Crackdown
25 July 2021 - 3:47PM
NEWSBTC
New Jersey, Texas, and Alabama have individual state regulators
issuing concerns that New Jersey-based DeFi firm, BlockFi, is
offering unregistered securities. Regulators seem to particularly
point to BlockFi’s Interest Account (BIA), which offers rates that
consumers are now becoming accustomed to in DeFi – but that have
blown traditional banking rates out of the water. The ‘Unusual
Three’ Crypto in it’s relatively early emergence in discussions
around regulation and broader adoption, has largely been considered
a somewhat bipartisan topic. Which makes the three states going
after BlockFi a particularly unusual trio. New Jersey, the
company’s home state and traditionally a very Democratic-run state
at that, is arguably the most aggressive of the three states making
claims against the firm. New Jersey has ordered BlockFi to stop
offering it’s BIA product to state residents by July 29 according
to a recent cease and desist from the state’s Bureau of Securities.
Texas, a traditionally Republican-led state, has also issued a
cease and desist with a hearing date currently set for October. The
document also cites BIAs as a concern, stating that BlockFi “is, in
part, illegally funding its lending operations and proprietary
trading through the sale of unregistered securities in the form of
cryptocurrency interest-earning accounts.” Finally, we have another
typically Republican-led state in Alabama issuing a ‘Show Cause
Order‘ to BlockFi this past week. The company now has less than 30
days to show the state securities commission why they should not be
issued a cease and desist for selling unregistered securities. The
show cause document suggests that BIAs should be registered with
applicable securities regulators. It’s becoming pretty clear, at
least in the case of BlockFi recently, that regulatory hurdles do
not live on any particular side of the political aisle. Bitcoin's
can be deposited into BlockFi's BIA product to yield substantial
interest-bearing returns. | Source: BTC-USD on TradingView.com
Related Reading | Uniswap Limits Access To Certain Tokens, What It
Could Mean For The DeFi Sector Is DeFi In Trouble? BlockFi issued a
recent responding statement in a tweet that stated that the firm
wholeheartedly believed that it’s BIAs were “lawful and appropriate
for crypto market participants”, adding that the company welcomes
“discussions with regulators and believe(s) that appropriate
regulation of this industry is key to its future success.” It’s
difficult to say the impacts in such an early stage of aggressive
regulatory attacks on DeFi, particularly given that of the major
players in the yield-generating space, only BlockFi is being
highlighted here. Will other states join these three, and will
major BlockFi competitors start facing challenges as well? Or are
these state regulators simply cracking a proverbial whip – or are
there enough substantial differences in how BlockFi competitors,
such as Nexo or Celsius, are funding their interest-bearing
accounts that leave them absorbing less regulatory risk? Either
way, it is becoming abundantly clear that crypto’s relatively quick
mainstream success, paired with slow-moving federal decision
making, will leave emerging firms – but hopefully not
forward-thinking consumers – with some inherent challenges. Related
Reading | Tether To Conduct An Audit To Negate Claims Concerning
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