The state of Alabama has become the second state in the United States to be concerned about BlockFi, a major cryptocurrency lending platform.
The Alabama Securities Commission (ASC) issued a show cause order to the New Jersey-based BlockFi company, ASC Director Joseph Borg officially ad Wednesday.
Already when faced with a cease and desist order of the New Jersey Bureau of Securities, BlockFi now has 28 days to explain why the platform should not be forced to cease and desist from selling “unregistered securities” in Alabama, the regulator said.
According to the ASC, the BlockFi interest accounts of BlockFi’s interest-generating cryptocurrency constitute securities. “BlockFi has raised at least $ 14.7 billion globally through the sale of these titles,” the regulator said.
The ASC alleged that BlockFi, alongside its affiliates BlockFi Lending and BlockFi Trading, was funding its cryptocurrency lending operations and trading “at least in part” with funds generated from the sale of unregistered securities in violation. securities laws. The order also claimed that BlockFi did not disclose to investors that its BIAs were not approved by the ASC or any other securities regulator, despite the company promoting itself as a “state regulated entity.” United”.
BlockFi later said the company was aware of the ASC’s show cause order, ensuring it was engaged in “active dialogues with regulators around the world,” including those in Alabama. The company remains confident that its products are legal and appropriate for participants in the crypto market, BlockFi said, adding, “Our position has not changed – the BlockFI interest account is not security.”
[1/1]We are aware of the show cause order issued by the Alabama Securities Commission. We have active dialogues with regulators around the world, including those in Alabama, to share details about our products, which we believe are legal and appropriate for crypto market participants.
-BlockFi (@BlockFi) July 21, 2021
The ASC said the action comes amid growing concern about the growing popularity of decentralized funding platforms such as BlockFi, designed to deliver financial services without relying on central financial intermediaries.
Unlike traditionally regulated banks and brokerage firms, investor funds are not protected by the Federal Deposit Insurance Corporation or the Securities Investor Protection Corporation, thus presenting a higher risk of loss, the authority noted.
The ASC action comes two days after the New Jersey securities regulator issued a cease and desist order on BlockFi, preventing the platform from onboarding new interest account clients into the state.