The BlockFi platform is reportedly set to pay two fines totalling $100 million. A sum that would be divided between the Securities and Exchange Commission (SEC) and other states in the country that are at the origin of a procedure concerning high interest rate products.
BlockFi in talks with SEC
The case began last July when the company received a demand letter from the Alabama Securities and Exchange Commission (ASC). The SEC and several US states accused BlockFi of offering services that generated returns on unregistered securities.
The product at issue was BlockFi Interest Accounts (BIA), which could offer up to 9.25% annual returns to the platform’s customers on their cryptocurrency deposits. This interest was generated through a system of loans and borrowings.
In order to settle the dispute, the platform is reportedly planning to pay $50 million to the SEC, as well as an additional $50 million to various states that initiated the proceedings, including New Jersey and Alabama.
To date, BlockFi has declined to respond to the rumours. However, it assures that its customers’ funds are safe and that the dialogue is open with regulators:
Statement from BlockFi: pic.twitter.com/gcqbg8zqAv
– BlockFi (@BlockFi) February 12, 2022
This case is reminiscent of the Coinbase lending project, which was nipped in the bud at the end of 2021. If we are to believe the words of Gary Gensler, the chairman of the SEC, we can expect a wave of regulation concerning this type of product in the United States:
We have a broad agenda and cryptocurrency is part of that agenda… We have taken a number of actions. We are trying to work with various platforms […] to get investor and public protection. “
Other platforms such as Celsius Network and Gemini Trust, also operating in the US and offering similar services, are therefore also likely to encounter such problems.
Beyond the notion of “unregistered securities”, it is also the insurance that is being questioned by the regulators concerning these offers. Indeed, these are still not very present in this aspect of our ecosystem, thus justifying for the SEC the famous consumer protection argument.
More than ever, centralised platforms will have to make efforts to communicate and comply with the authorities. This is a necessary step in order to change mentalities and find compromises that benefit everyone.
