Regulators in three US states are closing BlockFi cryptocurrency accounts


Cryptocurrency updates

U.S. state authorities have opened a new front in regulatory crackdown cryptocurrency business, targeting BlockFi, a company that raised $ 14.7 billion by offering crypto accounts with interest.

The last days Texas,, New Jersey i Alabama claim that the accounts are an unregistered offer of securities. New Jersey has ordered the company to stop offering the product from July 29, and other US states have threatened similar steps if BlockFi could not dissuade them.

“Our rules are simple: if you sell securities in New Jersey, you have to abide by the New Jersey Securities Act,” Andrew Bruck, the state’s attorney general, said Tuesday. “No one gets a free pass just because they do business in a fast-growing cryptocurrency market.”

Said New Jersey-based BlockFi tweet his interest-bearing account was “not a security” and was believed to be “legal and appropriate for crypto market participants”. He added: “We remain steadfast in our commitment to fighting for the rights of consumers to earn interest on their crypto assets.”

State-level regulatory unrest was particularly significant as it arose as national authorities in Washington struggled to formulate rules for cryptocurrencies.

Political observers noted that until July 16, Gurbir Grewal was the New Jersey Attorney General’s office, leaving the chosen position to head the Securities and Exchange Commission’s enforcement department, making him a key figure in the new federal crypto response.

Another intriguing aspect of combating BlockFi was that it involved states on both sides of the American political divide. New Jersey is a blue state. Alabama and Texas are red. Cryptocurrency bipartisanship, at least on some level, seemed possible.

“It’s an unusual group of states,” said Alexis Goldstein, director of financial policy at the Open Market Institute in Washington, D.C., adding: “There are real two-voice concerns about investor protection.”

BlockFi received a $ 3 billion investment in March from investors, including Bain Capital Ventures and Tiger Global Management, and allegedly seeking funds worth nearly $ 4.8 billion. The company said in March that it was on track to generate annual revenue of more than $ 500 million.

State regulators said BlockFi offered an “attractive” annual interest rate – up to 8.6 percent, according to a report in Texas – in exchange for cryptocurrency deposits such as bitcoin and ethereum on its BlockFi interest account or BIA. According to New Jersey authorities, deposits on March 31 were “equivalent to $ 14.7 billion.”

BlockFi “then pools these cryptocurrencies to finance its lending operations and trading its own products,” the New Jersey report said. He added that “BlockFi is free to use these assets as it sees fit, including mixing cryptocurrencies with those of other BIA investors.”

Richard Levin, chairman of fintech and regulatory practice at Nelson Mullins law firm, said the cases could be a signal for oversight by federal regulators.

“The State of New Jersey, the State of Texas and others can very well argue that this looks like a product that is a precedent-based security that applies to certain types of debt instruments,” Levin said.

In their report, Texas regulators noted that state law defines securities “broadly” to include not only “traditional products such as stocks and bonds,” but also “investment contracts, notes, and proof of indebtedness.”

These “broad product categories,” the Texas application said, “capture an endless number of unique and innovative investment schemes that are continuously introduced to the market.”

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