BlockFi received a cease and desist order to stop offering interest-bearing accounts from the New Jersey Attorney General’s Office.
According to the Bureau of Securities, BlockFi has also been funding and facilitating its cryptocurrency lending and trading operations at least partly through the sale of unregistered securities. These allegations would be in violation of relevant securities laws.
‘No one gets a free pass’
New Jersey’s authorities take particular issue with BlockFi’s offering of interest-bearing accounts. The New Jersey-based firm offers interest rates between 0.25% and 8.5%. These rates depend on the crypto asset and deposit size. BlockFi also offers a trading platform and bitcoin rewards credit cards. To compare, the U.S. national average for savings account interest is 0.06%, while 10-year Treasury notes yield 1.19%.
The announcement also highlighted how decentralized finance (DeFi) platforms are not FDIC or SIPC insured like traditional banks and brokerages. Although BlockFi offers similar savings and lending platforms to those operating on decentralized ledgers, it is a centralized company.
Based on the action and comments of the SEC and CFTC, bitcoin and Ethereum are widely believed to be commodities. However, this is much less clear for other assets supported by BlockFi such as Chainlink and Uniswap.
“Our rules are simple: if you sell securities in New Jersey, you need to comply with New Jersey’s securities laws,” said Acting Attorney General Andrew J. Bruck. “No one gets a free pass simply because they’re operating in the fast-evolving cryptocurrency market.” He added that the Bureau of Securities would be monitoring the issue closely.
Based in New Jersey, BlockFi is a financial services platform founded in 2017. Since then it has raised $500 million in private funding and has achieved a valuation of $5 billion.
Most recently, BlockFi partnered with Visa to launch its first crypto rewards card. BlockFi Visa Rewards Cardholders could earn 1.5% back in bitcoin on every purchase. This payout could then increase to 2% on every dollar spent over $50,000 annually. As crypto payment platforms proliferate, this most resembles Mastercard’s crypto rewards card, in partnership with Gemini.
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