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U.S. state authorities have opened a new front in the regulatory crackdown Cryptocurrency Business, targeting BlockFi, this company raised $14.7 billion by providing interest-bearing encrypted accounts.
The last few days Texas, New Jersey with Alabama It is claimed that these accounts are equivalent to unregistered securities offerings.The State of New Jersey ordered the company to stop July 29, Other US states threatened to take similar measures unless BlockFi can dissuade them.
“Our rules are simple: if you sell securities in New Jersey, you need to comply with New Jersey’s securities laws,” the state’s acting attorney general Andrew Brooke said on Tuesday. “No one gets a free pass because they operate in the fast-growing cryptocurrency market.”
BlockFi in New Jersey says A tweet Its interest-bearing account is “not a security” and believes that it is “legitimate and appropriate for crypto market participants.” It added: “We are firmly committed to fighting for the rights of consumers to earn interest through their crypto assets.”
The regulatory storm at the state level is particularly important because national authorities in Washington have been scrambling to develop cryptocurrency rules.
Political observers noted that until July 16, the New Jersey attorney-general’s office had been headed by Gurbir Grewal, who has left the elected post to run the enforcement division of the Securities and Exchange Commission, making him a key figure in the emerging federal response encryption.
Another interesting aspect of BlockFi’s repression is that it involves countries on both sides of the political divide in the United States. New Jersey is a blue state. Alabama and Texas are red. At least to some extent, bipartisan cooperation in cryptocurrency seems possible.
Alexis Goldstein, director of financial policy at the Washington Open Market Institute, said: “This is an unusual group of nations, adding: “Both parties are concerned about investor protection. “
BlockFi received a valuation of USD 3 billion from investors including Bain Capital Ventures and Tiger Global Management in March, and It is said that Seek funds with a valuation of nearly 4.8 billion U.S. dollars. The company said in March that its annual revenue is expected to exceed $500 million.
State regulators stated that BlockFi offers an “attractive” annual interest rate — up to 8.6% according to Texas documents — in exchange for cryptocurrencies such as Bitcoin and Ethereum in its BlockFi Interest Account (BIA) In the deposit. According to New Jersey authorities, as of March 31, total deposits were “equivalent to $14.7 billion.”
The New Jersey document stated that BlockFi “then pooled these cryptocurrencies together to fund its loan business and proprietary transactions.” It added: “BlockFi is free to use these assets as it sees fit, including mixing cryptocurrencies with the assets of other BIA investors.”
Richard Levine, Chairman of the Fintech and Regulatory Practice of Nielsen Mullins Law Firm, said that these cases may become a benchmark for review by federal regulatory agencies.
“New Jersey, Texas, and other states are likely to argue that this looks like a securities product based on precedents applicable to certain types of debt instruments,” Levine said.
The Texas regulatory agency pointed out in the filing that the “broad” definition of securities in state law includes not only “traditional products such as stocks and bonds,” but also “investment contracts, bills and debt evidence.”
The Texas document states that these “broad product categories” “cover countless unique and innovative investment plans that continue to be introduced to the market.”