BlockFi settles with the SEC, stops issuing new US crypto-lending accounts
BlockFi says it will adapt and is working on a new type of account to fit the rules. Here’s what happens in the meantime.
BlockFi, a popular crypto-lending platform, has agreed to pay a $100 million fine to the Security and Exchange Commission (SEC) and some states because the company didn’t register its BlockFi Interest Account lending product as a security. It’s also put those accounts on hold.
What this means for US customers is:
- You can’t open new BlockFi Interest Accounts.
- You also can’t add contributions to existing accounts.
- Existing clients will continue receiving interest on their existing holdings.
- BlockFi says it’s applying to register with the SEC a new crypto savings product called BlockFi Yield to meet current rules.
Other types of accounts aren’t impacted, nor are customers outside the US.
In a statement, BlockFi suggested this settlement will be positive for customers and investors because it outlines “a clear path forward for BlockFi and for Americans to earn crypto interest.”
The SEC’s allegations against BlockFi’s lending product
BlockFi, backed by Silicon Valley investor Peter Thiel, began offering its lending product in March 2019. It accumulated $14 billion in crypto assets from nearly 600,000 retail investors. The accounts paid interest to investors who lent their crypto assets.
These assets were lent to institutional investors, who were asked to offer collateral in case they failed to return the lent assets.
However, the SEC found, most institutions failed to provide the collateral required by BlockFi, making around 70% of the institutional loans inadequately collateralized.
BlockFi agreed to settle the charges
BlockFi will pay a $100 million fine, the largest penalty in a crypto-related action, to settle the charges with the SEC and 32 states. The company didn’t admit or deny wrongdoing or liability.
For now, US customers can’t open new interest accounts with BlockFi, while existing clients can continue receiving interest on their existing holdings without being able to add new funds.
BlockFi says it’s applying to register with the SEC a new crypto savings product called BlockFi Yield, which it says should solve this issue.
Other companies face similar scrutiny
The SEC issued a warning to similar companies and urged them to take immediate notice and come into compliance with federal securities laws.
This includes Celsius, Gemini and Voyager Digital, according to Bloomberg. Previously, Coinbase planned to launch a crypto lending product but stopped after the SEC suggested it would sue the company.
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