Shambhavi Soni
As per a draft press release from the attorney general’s office in New Jersey. The Bureau of Securities is intending to issue a summary cessation and desist order to BlockFi, a bitcoin financial services platform based in New Jersey to cease providing interest-based accounts.
If proceeded with, the action will be the first of its kind against the companies dealing in crypto.
What does the draft say?
The draft alleges BlockFi of facilitating its cryptocurrency lending and trading operations partly through sales of unregistered securities, which is a violation of relevant securities law. It should be noted that the draft was undated and unpublished.
In the recent crypto bull run since its launch in 2017, the company has experienced significant growth. BlockFi’s private finance has increased by $500 million and an estimate of $5 billion
In addition to a trading platform, the New Jersey-based company offers interest rates between 0.25% and 8.5% depending on the value of the asset and the deposit. The FDIC shows that the national average savings interest is 0.06%, with ten-year Treasury bills returning 1.19%.
The statement in the draft continues by highlighting the lack of FDIC or Sipc protection like traditional banks and brokerage offered by decentralised financial platforms, known in the market as DeFi. Although BlockFi offers saving and loan systems comparable to those operating on decentralised ledgers like Uniswap or Compound, it is, however, a centralised firm.
“Our guidelines are simple: if you sell securities in New Jersey you have to comply with New Jersey Securities Laws. said, Acting General Procurator Andrew J. Bruck. Nobody gets a free pass just because they are working on the changing bitcoin industry. Our Securities Office will actively monitor this problem while protecting investors.” he added.
When Bitcoin and Ether products are widely considered to be based on SEC and CFTC remarks and actions, there is less certainty with regard to other BlockFi-supported assets, such as Chainlink and Uniswap. If the termination and withdrawal are finally signed, it might provide a precedent for how governments can handle other assets still to be categorised.
Also read: Coinbase’s international expansion plan: seeks every cryptocurrency on its exchange
The CEO’s response.
BlockFi CEO Zac Prince in his initial response stated that the company is completely unaware of any forthcoming measures with the office of the General Prosecutor of New Jersey. Our connection with authorities in New Jersey and other government and federal officials is excellent.
Later, in a series of tweets, Prince assured its customers. “Late Monday evening BlockFi received an order from the New Jersey Bureau of Securities regarding BlockFi Interest Account (BIA) operations in the State of New Jersey…We remain fully operational for our existing clients in New Jersey”, he said. He also noted that the order calls for BlockFi to stop accepting new BIA clients residing in New Jersey beginning July 22.