The New Jersey Attorney General’s office has issued a cease-and-desist letter to blockchain company Block Fi to get the firm to end all marketing for its interest-bearing accounts.
Block Fi Is at the Center of Some Unwanted Attention
According to the letter, Block Fi has been busy selling unregistered securities and violating present securities laws. The company provides interest rates of anywhere between .25 percent and 8.5 percent depending on the amount of money deposited and the digital asset in question. In addition, Block Fi also gives its customers access to a digital currency trading platform and BTC rewards cards.
One of the issues with the firm as stated in the letter is that despite offering both lending and savings options often seen in a decentralized finance (defi) environment, Block Fi is allegedly centralized and controlled by a single body. The firm also does not offer any insurance.
In a statement, Attorney General Andrew J. Bruck explained:
Our rules are simple: if you sell securities in New Jersey, you need to comply with New Jersey’s securities laws. No one gets a free pass simply because they are operating in the fast-evolving cryptocurrency market. Our Bureau of Securities will be monitoring this issue closely as we work to protect investors.
One thing that the crypto space really lacks is clarity. During the 2020 presidential election, several candidates – including businessman Andrew Yang and former New York mayor and publicist Michael Bloomberg – based their campaigns partly on providing clearer regulations when it came to crypto assets and how they would be taxed and viewed. Unfortunately, neither man was able to even make a dent in the race, and as a result, crypto laws are just as cloudy as ever.
This lack of clarity has often led to heavy problems for blockchain firms hosting initial coin offerings (ICOs) or providing newly minted tokens. Often, these companies find themselves at the mercy of regulatory agencies such as the Securities and Exchange Commission (SEC), which will go after these firms for reportedly disobeying securities laws. These companies typically find themselves either paying penalty fees or being forced to close their doors permanently.
Initially, Block Fi claimed to have no knowledge of the cease-and-desist order, with CEO Zac Prince explaining:
The company has no knowledge of any impending actions with the New Jersey Attorney General’s office. We maintain great relationships with the New Jersey regulators and other state and federal regulators.
Recognizing the Letter
Unfortunately, not long after, Prince tweeted the following:
Late Monday evening, Block Fi received an order from the New Jersey Bureau of Securities regarding Block Fi Interest Account (FIA) operations in the state of New Jersey… We remain fully operational for our existing clients in New Jersey.
As it stands, Block Fi must end all relationships with new customers in New Jersey beginning July 22 of this year.