The logo of the BlockFi cryptocurrency platform.
Budrul Chukrut | SOPA images | LightRocket via Getty Images
Cryptocurrency firm BlockFi said Monday that it has agreed to pay $100 million to the U.S. Securities and Exchange Commission and several states to settle fees related to its money-lending product. its popular electronics.
BlockFi, backed by Silicon Valley investor Peter Thiel, touts itself as a bank-like platform for crypto users. The company offers a popular savings product that allows customers to accrue interest on their digital currency holdings.
BlockFi advertises annual percentage returns as high as 9.25% on its website, much higher than the average savings rates offered from incumbent financial institutions. The company said it was able to offer such an interest rate because large institutional investors were willing to pay more to borrow deposits.
Bitcoin and other digital assets are not regulated, however, authorities have become concerned due to the lack of oversight over crypto-related services that closely resemble traditional financial products. be managed.
On Monday, the SEC said it had charged BlockFi with failing to register its retail crypto lending product, the BlockFi Interest Account, and of violating the registration terms of the Investment Companies Act of 1940.
BlockFi has agreed to pay the SEC $50 million to settle the allegations, without admitting or denying wrongdoing or liability. It will also pay an additional $50 million to 32 states for similar fees.
“This is the first case of its kind involving cryptocurrency lending platforms,” said SEC Chairman Gary Gensler. “Today’s agreement clarifies that crypto markets must comply with time-tested securities laws.”
Following the settlement, BlockFi said US customers will no longer be able to open new interest accounts with the company. Customers can continue to receive interest on their existing shares, the company said, but cannot add new assets to their accounts.
BlockFi says it is currently filing with the SEC to offer a new crypto savings product, called BlockFi Yield. The company added that it intends to eventually migrate existing US users to the new service, unless it decides not to do so. BlockFi said the move provides “regulatory clarity” to the industry.
“Since the day we founded BlockFi, we have known that strong engagement with regulators will be critical to the adoption of financial services powered by cryptocurrencies.” BlockFi CEO and founder Zac Prince said in a statement.
“Today’s milestone is another example of our pioneering efforts in ensuring regulatory clarity for the broader industry and our customers, like us.” I made my first product – a crypto-backed loan,” he added.
The SEC has also issued warnings to other crypto lenders that offer services like BlockFi’s, with Gurbir S. Grewal, the agency’s director of enforcement, saying that they “should immediately notify them.” about the solution today and comply with federal securities laws.”
The watchdog is reported scrutinized Celsius, Gemini, and Voyager Digital as part of an investigation into crypto lending practices, according to Bloomberg. All three companies said they were cooperating with regulators.
Last year, Coinbase Shelved plans to launch its own profitable cryptocurrency product after the SEC threatened to sue the company. The crypto exchange’s CEO, Brian Armstrong, had a public spat with the watchdog, accusing it on Twitter of “sketchy behaviour”.
Founded in 2017, BlockFi has raised a total of more than $500 million in venture funding to date, according to CB Insights data, and was last privately valued at $3 billion.
