The Iowa Insurance Commission said on Wednesday that crypto lender BlockFi has agreed to pay roughly $1 million to settle charges of offering unlicensed interest-bearing accounts for retail investors.
The state regulator said the crypto lending platform, backed by billionaire Mike Novogratz’s Galaxy Capital, agreed to settle for an administrative fee of $943,396.22 without admitting or denying the charges.
Several state regulators in the US have already issued cease and desist notices to BlockFi, which claims over $10 billion in client assets. This coordinated regulatory scrutiny hinged on the firm’s crypto savings and loans product, dubbed BlockFi Interest Accounts (BIAs).
“While innovations, like cryptocurrencies, may provide for growth and evolution in the financial system, it is important that regulators ensure this occurs within an appropriate framework that protects investors while still facilitating responsible capital formation,” Iowa Insurance Commissioner Doug Ommen said. “Iowans can always double-check before investing to make sure an investment is properly registered with the Iowa Insurance Division by calling 877-955-1212.”
Earlier this year, BlockFi agreed to pay a $50 million penalty to the SEC and additional $50 million in fines to 32 states to settle similar charges. The company and its parent also agreed to cease selling its Interest Accounts, which let users earn returns on cryptocurrencies, and attempt to register their business within 60 days.
BlockFi launched its service earlier in March 2019, offering loans to those who are interested in borrowing crypto, starting from $2,000, and go as high as $100 million, against bitcoin, ethereum, and stablecoins.
The Winklevoss twins’ Gemini exchange is providing the custody to BlockFi accounts, which also offer digital asset insurance coverage. However, the SEC said the product constitutes an offering of unlicensed securities and is akin to the usual savings account provided by banks.
The SEC is reportedly investigating Celsius Network, Voyager Digital, and Gemini Trust, as a part of a broader scrutiny against cryptocurrency lending platforms. Until now, the regulator did not accuse the three crypto firms of any wrongdoings or brought charges yet. Rather, the SEC is checking if their DeFi and lending products should be registered as securities.
The US regulators signaled a big change in policing cryptocurrencies and the growing Defi sector after they blocked Coinbase from launching a new crypto lending product. The SEC officials have increasingly been talking about a need to crack down on these products, which are essentially unregistered interest-bearing accounts, the agency claims.
SEC’s probe into DeFi products comes amid heightened regulatory interest into cryptocurrencies and the digital asset market. Chair Gary Gensler called on Congress to give the agency more authority to better police crypto trading and lending platforms, which pay customers rates higher than most bank savings accounts.
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