BlocksInform
On Feb. 14, the Securities and Exchange Commission, or SEC, announced actions against crypto lending company BlockFi's failure to record high-yield accounts that the agency regards as securities.
New Jersey's blockfi will pay $50 million in second-hand settlements and $50 million to 32 U.S. states that have laid similar charges. This is one of the heaviest penalties ever imposed by a U.S. federal regulator on a cryptocurrency service provider. The company also agreed to cease integrating new customers into the non-registered service, block fi interest accounts, and attempt to bring it into compliance with the investment companies act of 1940 within the next 60 days.
Block fi interest accounts, released in march 2019, allowed investors to lend their crypto assets to the platform in exchange for monthly interest payments of up to 9.5% — significantly higher rates than interest-bearing deposit accounts in most traditional financial institutions offer.
Despite widespread criticism that securities laws drafted in the 1930's and 1940's may have limited applicability to asset-based digital products, president gary gensler praised the settlement as an instructive precedent for crypto loan platforms. Gensler said in an opening statement:
Today's regulations make it clear that crypto markets must comply with tried and tested securities laws, such as the Securities Act of 1933 and the Investment Company Act of 1940. It further demonstrates the Commission's willingness to work with crypto platforms to determine how they can comply with those laws.
Cryptocurrency lending products have begun attracting increased scrutiny from both federal and state regulators last September. According to a January report, the SEC was investigating products similar to BlockFi Interest Accounts offered by Gemini, Celsius Network and Voyager Digital to determine if these offerings were headlines.
