Block-Fi, a popular crypto lending platform has recently been in regulatory hot waters over its interest account (BIA) services. The crypto platform is now facing a probe over the legality of BIA from the fourth state in the US within a week. As per the company’s website, the Vermont Security regulator has also intimated a probe whether BIA qualifies as a security and thus must be registered with the security’s office before issuance.
Blockfi on its website made it clear that the interest accounts are not insured by the Federal Deposit Insurance Corporation (FDIC) or the Securities Investor Protection Corporation (SIPC). These accounts are also not registered with any federal or state securities regulatory authority as they beleive it doesn’t qualify as a security.
It all started with the New Jersey Bureau of Securities. issuing a cease and desist notice against BlockFi on July 19, claiming BIA is unregistered security as per New Jersey’s security laws. Apart from New Jersey and Vermont the security regulators in Florida and Alabama are also investigating the legality of BIA in their respective states.
BlockFi maintains that its BIA product is not a security and thus shouldn’t be regulated as one. The crypto platform said,
“We are in active dialogue with multiple regulators to demonstrate that the BIA is not a security and should not be regulated as one. We firmly believe that the BIA is lawful and appropriate for crypto market participants, and we remain steadfast in our commitment to fight for consumers’ rights to earn interest on their crypto assets.”
Crypto Companies Continue to Face Regulatory Hurdles in the US
BlockFi’s interest account offers compound interest on cryptocurrencies between 3% and 8.6%. The product had become quite popular in the US market that has also helped the crypto platform to close one of the biggest funding rounds at $350 million, giving it a $3 billion valuation. BlockFi had also revealed its plans of going public despite the brewing regulatory trouble.
Crypto companies have continued to face the wrath of regulators because of their product offerings. Several other crypto firms have also faced security law violation probes and fines that include Kik, Telegram, and the ongoing Ripple lawsuit.