U.S. crypto lending platform BlockFi has been ordered by the New Jersey Bureau of Securities to stop accepting new customers who are based in New Jersey for its interest-bearing accounts due to alleged violations of securities laws. The order takes effect from from July 22.
Fast facts
- In a series of tweets, BlockFi’s CEO and founder, Zach Prince, said that the platform had received an order regarding BlockFi Interest Account operations in New Jersey late on Monday evening. “We remain fully operational for our existing clients in New Jersey,” Prince said.
- “BlockFi is engaged in an ongoing dialogue with regulators to help them understand our products, which we believe are lawful and appropriate for crypto market participants,” Prince tweeted. “BIA is not a security, and we therefore disagree with the action by the New Jersey Bureau of Securities.”
- The BlockFi Interest Account gives customers an annual percentage yield of up to 7.5% on their cryptocurrencies, depending on the crypto held and the deposit amount. Cryptos include Bitcoin, Ethereum, Chainlink, Litecoin, PAX Gold, Gemini Dollar, Binance USD, USD-backed stablecoins (BUSD, GUSD, PAX, and USD Coin) and Tether.
- BlockFi, which closed a US$350 million Series D funding round earlier this year, is backed by many prominent firms, including Valar Ventures, Galaxy Digital, Fidelity, Coinbase Ventures, and Asia-based HashKey Digital Asset Group and Three Arrows Capital. In addition to its interest product, BlockFi offers a trading platform, a Bitcoin rewards credit card, a Bitcoin trust, an over-the-counter trading desk and private client services in Asia.
- Prince’s tweets came after Forbes published an article citing a draft press release from the New Jersey Office of the Attorney General on a summary cease-and-desist order for BlockFi to stop offering interest-bearing accounts. “If signed, this action could be the first of its kind against crypto lending platforms that have seen rapid growth during the recent crypto bull run,” Forbes said.
- Aside from BlockFi, many other crypto firms, such as Coinbase and Gemini, offer interest products that provide significantly higher returns than those paid by traditional banks. The products have raised questions over how the companies are able to offer such rates of interest. According to the Federal Deposit Insurance Corporation, the average national average deposit rate is 0.06%.