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BlockFi Encounters Regulatory Problems – A Sign of Regulation Changes

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Aug 5, 2021

Renowned cryptocurrency lender Blockfi has been encountering regulatory checking from numerous states based in America before the public listing proposed earlier. The eventful year of Blockfi has been continued during this year’s second half as numerous regulators are cracking down on Blockfi’s interest accounts. This move most likely is beginning to mark other headaches for this non-bank-based lender during this year of public listing and fundraises. This could all lead to technical issues and controversy.

The regulators who are after these interest-based accounts could also prove to be bellwethers of the probable regulations aimed towards the loan market in this cryptocurrency world. A scenario like this could be possible, especially considering the present attention on America’s regulations regarding digital currencies.

By curtailing most of the cryptocurrency providers, there is a good chance the focus could go towards the counterparts who are decentralized. This is especially true considering the rhetoric context such as the financial 911.

It’s also worth keeping in mind that Blockfi received various cease and desist letters from three states during the month of July. Regulators in Texas, Alabama, and New Jersey even accused the crypto company of providing securities that were unlicensed.

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While there is no denying that scrutiny most likely hinges on the loan products and crypto savings of Blockfi, users will still be able to send their cryptocurrencies to accounts that bear interests. For those who don’t know, these accounts are referred to as Blockfi Interest Accounts. What’s more, these accounts, use collateral for gaining loans. In addition, the regulators present in such states claim that the product offers securities that are not licensed.

All of this started during the initial part of July. This is when New Jersey’s Bureau of Securities sent a cease and desist letter to Blockfi. This letter ordered a moratorium for account openings from the company. The order was initially supposed to take place on the 22nd of July, but it faced a one-week delay. Unfortunately, this delay did not stick and was pushed further ahead to a month.

On its website, Blockfi released a statement for assuring its customers that it planned to continue and maintain a dialog, making sure the goodwill with regulators remains intact. Once this happened, Alabama followed suit as it stated that Blockfi funded its lending activities with the help of various unlicensed securities.

As of now, the organization has twenty-eight days to come up with a reason as to why it should not get a cease and desist letter.

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