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On the 14th of February, the SEC revealed that it charged BlockFi over failure to register BlolckFi Interest Accounts, its retail crypto lending product.
Crypto company BlockFi has agreed to pay a settlement sum of $100 million to the US Securities and Exchange Commission (SEC) and 32 states due to its crypto lending service. BlockFi has been allowing customers to lend its digital assets and earn interest on their crypto holdings since March 2019. The percentage yield the crypto firm offers on its website is as high as 9.25%. This is a lot higher than the rate incumbent financial institutions offer on average savings. According to BlockFi, the rates are available as such and large institutional investors are willing to even pay more to borrow the deposits.
The authorities have constantly shown concern regarding the fact that cryptocurrencies are not regulated. Also, regulators are concerned that services related to these unregulated assets are available just as traditional financial products, which are regulated. Before now, the SEC had noted that it would take action against any crypto company that offers loan products without registering them as securities. The Commission also added that these companies would register as investment firms to enable them to make the load services available to their consumers.
BlockFi vs SEC
On the 14th of February, the SEC revealed that it charged BlockFi over failure to register BlolckFi Interest Accounts, its retail crypto lending product. The Commission also said it charged the crypto company for violating the registrations rules of the Investment Company Act of 1940. Without agreeing or denying the allegations. BlockFi agreed to pay $50 million to settle the charges. In addition, the company also agreed to pay another $50 million to 32 states over the same accusation.
SEC Chair Gary Gensler commented on the BlockFi matter, saying:
“This is the first case of its kind with respect to crypto lending platforms. Today’s settlement makes clear that crypto markets must comply with time-tested securities laws.”
After the settlement to the SEC, BlockFi said its US customers will no longer have access to open new interest accounts. Although existing clients will continue to receive interest on their existing holdings, they will no longer be able to include new assets to their accounts.
Moving forward, BlockFi is planning to offer a new crypto savings product called BlockYield. However, the company has started applying to register the new offering with the SEC to provide “regulatory clarity” for the industry. Additionally, BlockFi plans to move its existing customers in the US over to the new services, if they wish.
“From the day we started BlockFi, we have always known that strong engagement with regulators would be critical for the adoption of financial services powered by cryptocurrencies. Today’s milestone is yet another example of our pioneering efforts in security regulatory clarity for the broader industry and our clients, just as we did for our first product – the crypto-backed loan,” said the company.