BlockFi, a crypto financing institution, will pay $100 million in fines to the Securities and Exchange Commission (or SEC) and 32 US states after paying the fees related to its interest rate program (via The block† Regulators say the company’s BlockFi Interest Accounts, which allow users to earn returns on cryptocurrencies such as Bitcoin, Ethereum and USDT, were unregistered securities and BlockFi was not properly registered as an investment company.
BlockFi pitched its interest accounts as a way to earn “up to 9.25 percent” interest on crypto deposited into the account, although the percentage varied from month to month and depended on how much you deposited. According to the SEC, because customers technically lent their assets to BlockFi, customers had to be registered as a security. The company announced that it plans to create a new product called BlockFi Yield, which it says will be registered with the SEC and will largely fulfill the same role of letting people earn interest on their crypto. BlockFi “plan”[s] that BlockFi Yield will become a new SEC-registered crypto-interest-bearing security, allowing customers to earn interest on their crypto assets,” said a statement from the company’s CEO Zac Prince.
“Crypto lending platforms that offer securities such as: [BlockFi’s Interest Accounts] should immediately take note of today’s resolution and comply with federal securities laws,” said SEC director Gurbir Grewal.
While the regulator says the settlement with BlockFi is “the first case of its kind involving crypto lending platforms,” it isn’t the first time it has gotten entangled with a crypto firm over these types of products. Last year, Coinbase canceled the launch of its Lend program, which it called a “high-yield alternative to traditional savings accounts.” The company says the SEC threatened legal action if Lend was launched, claiming it would be regulated as a security. At the time, Coinbase said it was seeking “regulatory clarity for the crypto industry” and has since launched a similar product that allows non-US customers to earn interest on their crypto.
BlockFi says customers who are not in the US will not be affected by Monday’s resolution. US customers will still continue to earn interest on the crypto they have in their interest accounts, but will no longer be able to deposit – those accounts will also convert into BlockFi Yield accounts after the program is registered with the SEC.