Surprise twist as BlockFi receives Money Services License in Iowa
Just two weeks after being fined by Iowa’s regulators for offering and selling unregistered securities, crypto lending platform BlockFi announced on June 28 thait has received a Money Services License in the state.
The Iowan license will allow the crypto lender to receive money and sell payment instruments in the state. BlockFi on Twitter stated it will begin by allowing Iowan residents to trade stablecoins.
We're excited to announce that we’ve received our Money Services License in Iowa.— BlockFi (@BlockFi) June 28, 2022
Iowa residents can now trade stablecoins on our platform and instantly transfer funds via ACH. pic.twitter.com/sNEFIlCeWY
Previously on June 14 the Iowa Insurance Division (IID) responsible for securities sales in the state fined BlockFi over $943,000 for violations of the state’s Securities Act. IID alleged BlockFi had “offered and sold securities in Iowa that were not registered or permitted for sale in Iowa” along with failing to register as a broker-dealer or agent.
The fine was part of a larger penalty brought by the United States Securities and Exchange Commission (SEC) in February for not registering an offering of high-yield interest accounts that the commission deemed to be securities.
The fine was one of the largest penalties ever imposed by a federal regulator on a crypto business. BlockFi was hit with $100 million in settlements, with half paid to the SEC and the other half to 32 states which brought forward similar charges.
Shortly after, BlockFi said it intended to register with the SEC for a crypto interest-bearing security for its U.S. customers to replace its current interest accounts offering.
The new license is a glimmer of good news for BlockFi which has struggled along with other blockchain and crypto companies in the worsening market conditions and falling crypto prices.
On June 16, BlockFi was among the lending firms forced to liquidate some of the positions from venture firm Three Arrow Capital (3AC) with the latter unable to meet a margin call on its Bitcoin (BTC) borrowings.
Celsius, a rival crypto lending platform, paused customer withdrawals on June 13 attributing the decision to the market conditions. Other reports followed that the company was facing liquidity issues and would soon be facing insolvency.
These conditions have also seen a round of layoffs from blockchain and crypto companies, with BlockFi CEO Zac Prince saying on June 14 that it would be letting 20% of its staff go in order to remain profitable. It’s unknown how much of an effect the SEC’s financial penalties had on the decision.
A week later on June 21, BlockFi received a lifeline from crypto exchange FTX which saw BlockFi sign a revolving credit facility agreement for $250 million to bolster the firm's balance sheets and strengthen the platform.
Days later, it was reported that FTX may be in talks to purchase a stake in BlockFi, although a BlockFi spokesperson told Cointelegraph on June 24 that it “does not comment on market rumors" and is “still negotiating the terms of the deal”, and shareholders are reportedly unhappy with the move as it would wipe out shareholder equity.
It has recently been reported that Anthony Pompliano's investment firm Morgan Creek is attempting to put together an alternative $250 million deal to buy a majority stake in BlockFi.
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