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Crypto lending and trading platform BlockFi has been given a cease and desist order by the New Jersey Bureau of Securities to stop offering interest-bearing accounts, first reported by Forbes and later confirmed by the company late on Monday. The multi-billion-dollar crypto financial services platform received an order regarding BlockFi Interest Account (BIA) operations in the State of New Jersey, said Zac Prince, BlockFi CEO on Twitter. BIA is popular for offering high yields relative to its counterparts in the traditional world — its double-digit APY competes with fintech’s sub 1% yields. The unpublished draft with no date contended that BlockFi has been funding and facilitating its operations at least partly through the sale of unregistered securities in alleged violation of relevant securities laws. It then goes on to highlight how DeFi does not offer FDIC or SIPC insurance like traditional banks. At the end of last month, BlockFi had announced support for Uniswap (UNI) in its BIA section, offering an introductory rate of up to 3.75% APY through July 31, 2021. “Our rules are simple: if you sell securities in New Jersey, you need to comply with New Jersey’s securities laws. No one gets a free pass simply because they’re operating in the fast-evolving cryptocurrency market. Our Bureau of Securities will be monitoring this issue closely as we work to protect investors,” said Acting Attorney General Andrew J. Bruck in a statement. Meanwhile, the chief executive officer clarified that they “remain fully operational” for its existing clients in New Jersey and that the order calls for them to only stop accepting new BIA clients residing in the state beginning July 22, 2021.
“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. BIA is not a security, and we therefore disagree with the action by the New Jersey Bureau of Securities.”Founded in 2017, BlockFi has raised $500 million in private funding and has a valuation of $5 billion. According to Matt Ballensweig, Head of Lending at Genesis, this decision by the New Jersey regulator might not mean anything, at least in the short-term other than “more regulatory uncertainty.” He doesn’t expect this to have any impact on crypto borrowing rates either for now. It’s just NJ so far, but we'll see how this shakes out, he said.