BlockFi, the cryptocurrency lending platform, has been granted a Money Services License in Iowa just two weeks after being fined. Iowa’s regulatory body slammed a significant fine on BlockFi for dealing with unregistered securities.
As a result, BlockFi was fined for selling and offering unlicensed digital products, which the regulators deemed illegal. Residents can buy and trade crypto if the crypto firm has been granted a license to offer fully approved digital services.
BlockFi is no Longer Blocked
As a crypto lending service provider, the new license will allow BlockFi to offer payment plans and receive transfers in the state of Iowa. According to its Twitter handle, BlockFi announced that it would begin offering Iowans the opportunity to trade in stablecoins of their choice.
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We're excited to announce that we’ve received our Money Services License in Iowa.
Iowa residents can now trade stablecoins on our platform and instantly transfer funds via ACH. pic.twitter.com/sNEFIlCeWY
— BlockFi (@BlockFi) June 28, 2022
The new development marks a turning point for BlockFi as it attempts to pull itself back after the setback from the broader crypto market. Moreover, the crypto lending platform was part of the lending firms forced to liquidate some of their assets by Three Arrows Capital (3AC) on June 16.
This was because 3AC could not meet the criteria for a margin request on its Bitcoin borrowings. The market has devastated many crypto lending platforms, with many job cuts announced over the past weeks.
On June 14, BlockFi’s CEO, Zac Prince, announced a 20% cut in its staff strength to stay afloat following the market chaos. However, crypto exchange firm FTX offered BlockFi a lifeline by providing a credit facility of $249 million.
As per Cointelegraph, FTX is rumored to be looking to purchase some stake in BlockFi, but the deal is still under negotiation. However, BlockFi shareholders do not support the deal as it will erase shareholders’ equity.
BlockFi is still open to selling some stakes to maintain its stay and avoid going the way of Celsius, which is currently facing insolvency.
BlockFi Slammed with Penalties for Violating Rules
The Iowa Insurance Division (IID), on June 14, slammed BlockFi for close to $1 million for violating the state’s Securities Act through selling unregistered securities. In addition, IID alleged that BlockFi failed to register as a broker-dealer while operating in Iowa, which is another violation.
Moreover, the U.S. Securities and Exchange Commission (SEC) introduced the fine as part of its broader regulations guiding the activities of crypto firms. According to the SEC guidelines, failing to register a high-yield interest account is a punishable offense.
As a result, BlockFi was heavily fined and forced to pay $109 million in a settlement. Half of the payments go to the SEC, with half shared between 32 U.S. states, which also forwarded similar complaints to the federal regulator.
After settling the fine, the crypto lending platform announced its readiness to register as a security products provider. BlockFi wants to stop offering interest-bearing account services to its U.S. customers.
The new Money Services License is a huge achievement for BlockFi, which has experienced a downtrend alongside other crypto firms.