In brief
- BlockFi has drawn attention from securities regulators in New Jersey, Texas, Alabama, and Vermont.
- Regulators believe it is offering unregistered securities.
Crypto lender BlockFi is facing lots of questions from state regulators. It just bought a little more time to address some of them.
According to BlockFi CEO Zac Prince, the New Jersey Bureau of Securities has extended a deadline to stop offering its BlockFi Interest Account (BIA) in the state to September 2.
The state's attorney general originally filed a cease and desist against the company on July 19, demanding that new BIAs, which promise up to 7.5% annual returns on deposited crypto, cease by July 22.
“Our rules are simple: if you sell securities in New Jersey, you need to comply with New Jersey’s securities laws," said Acting Attorney General Andrew J Bruck at the time.
That was the first in a series of actions by state securities regulators against the upstart lender. New Jersey was quickly joined by Alabama, Texas, and, just this weekend, Vermont.
In a blog post today, Prince spun it as potentially good news: "We’ve said time and again that the key to our industry’s success is appropriate regulation. Ultimately, we see this as an opportunity for BlockFi to help define the regulatory environment for our ecosystem."
Whereas much of the conversation about cryptocurrency regulations relates to whether certain digital assets are unregistered securities, state securities regulators are preparing to argue that the BIA product itself is an unregistered security offering, or an investment contract that hasn't been vetted by the Securities and Exchange Commission or their state-level counterparts.
The Texas State Securities Board put it simply in a July 22 cease and desist: "They are not registered with the Texas State Securities Board to offer or sell securities in Texas, as required by Section 12 of the Securities Act, and the BIAs are not registered or permitted for sale in Texas, as required by Section 7 of the Securities Act. Accordingly, Respondents are violating laws designed to protect Texans."
BlockFi Interest Account accept a variety of stablecoins, including Tether and Gemini USD, as well as Bitcoin, Litecoin, and other crypto assets.
Prince today vowed to "fight for your rights to earn interest on your crypto assets."