BlockFi continues rejecting securities regulators’ allegations that its Interest Accounts are unregistered securities.
The state of Alabama has become the second state in the United States
to raise concerns over BlockFi, a major cryptocurrency lending
platform.
The Alabama Securities Commission (ASC) has issued a
show-cause order to New Jersey-based company BlockFi, ASC director
Joseph Borg officially announced on Wednesday.
Already facing a cease and desist order
from the New Jersey Bureau of Securities, BlockFi now has 28 days to
provide cause why the platform should not be forced to cease and desist
from selling “unregistered securities” in Alabama, the regulator said.
According
to the ASC, BlockFi’s interest-earning cryptocurrency BlockFi Interest
Accounts constitute securities. “BlockFi has raised at least $14.7
billion worldwide through the sale of these securities,” the regulator
claimed.
The ASC alleged that BlockFi, alongside its affiliates
BlockFi Lending and BlockFi Trading, has been funding its crypto lending
operations and trading “at least in part” through funds generated from
the sale of unregistered securities in violation of securities laws. The
order also claimed that BlockFi has failed to disclose to investors
that its BIAs are not approved by the ASC or any other securities
regulator despite the firm touting itself as a “U.S. regulated entity.”
BlockFi
subsequently said that the company was aware of the ASC’s show-cause
order, assuring that it has been engaged in “active dialogues with
regulators worldwide,” including those in Alabama. The firm remains
confident that its products are lawful and appropriate for crypto market
participants, BlockFi said, adding, “Our stance hasn’t changed — the
BlockFI Interest Account is not a security.”
The ASC said that the action comes amid rising concerns over the
growing popularity of decentralized finance platforms like BlockFi,
which are designed to provide financial services without relying on
central financial intermediaries.
Related: World Economic Forum releases policy toolkit for DeFi regulations
In
contrast to traditionally regulated banks and brokerage firms, investor
funds are not protected by the Federal Deposit Insurance Corporation or
Securities Investor Protection Corporation, thus presenting a higher
risk of loss, the authority noted.
The ASC’s action comes two days
after the New Jersey securities regulator issued a cease and desist
order to BlockFi, blocking the platform from onboarding new interest
account clients in the state.
source link : https://cointelegraph.com/news/alabama-regulators-accuse-blockfi-of-offering-unregistered-securities
