BlockFi’s eventful 2021 has continued in the second half of the year as state regulators in the United States began to crack down on the company’s crypto interest-bearing accounts. The move likely marks another operational headache for the non-bank lender in a year of substantial fundraises and public listing plans interspaced by controversy and technical blunders.
State regulators going after crypto interest-bearing accounts may also stand as a bellwether of possible federal regulations targeted at the cryptocurrency loan market. Indeed, such a scenario might be possible given the current focus on digital currency regulations in America.
From curtailing centralized crypto lenders, the focus of attention could move to their decentralized counterparts, especially amid the context of rhetoric like “financial 9/11” being ascribed to decentralized finance (DeFi) by members of Congress. Indeed, MakerDAO founder Rune Christensen recently warned that a U.S. crackdown on the sector would be an “own goal” 10 times more severe than China’s reported muzzling of private-sector tech giants.
Cease and desist
BlockFi has been served cease and desist notices by three states in the U.S. in July alone. Regulators in New Jersey, Alabama and Texas have accused the company of offering unlicensed securities.
This seemingly coordinated regulatory scrutiny reportedly hinges on BlockFi’s crypto savings and loans product wherein users can deposit their cryptocurrencies into interest-bearing accounts, dubbed BlockFi Interest Accounts (BIAs), and use the same as collateral to obtain loans. Regulators in these states say the product constitutes an offering of unlicensed securities.
It all started