BlockFi in SEC’s radar as its high-interest product comes under scrutiny
BlockFi’s crypto product where it offers high-interest rates to investors and users who deposit their crypto tokens with it has come under scrutiny from the Securities and Exchange Commission (SEC) as it offers much more than the normal rates that are offered by banks.
It may be noted that the SEC had recently prevented Coinbase from launching its lending product as it was not satisfied with the background of the program as the SEC continues to believe that most of the cryptos are securities and hence need to come under its purview and regulation. This has been vehemently opposed by cryptos like Ripple and that battle has been going on in the courts for some time now. Ever since Gensler took over as Chair, he has been very clear that companies that offer such crypto products should first discuss with it how they need to be regulated before going ahead with the same.
But so far, there has not been much clarity on what sort of regulations need to be adhered to and so now the SEC is rounding up those businesses that have launched already with products that have not got its approval as yet. They have been joined by states like New Jersey and Texas who have also questioned the product of BlockFi with New Jersey issuing a cease and desist order on it to stop taking in new accounts until through December. It has over half a million real accounts and has been doing good business with its products.
The SEC has so far not taken many actions against the platform but it would find it hard to justify allowing the continuation of the program while it shuts down other comparable businesses for the reason of regulation. The SEC would need to quickly come out with a regulation of the crypto industry to create a level playing field and make it clear for existing and new businesses on what is allowed to be run within the country and what is not. It also needs to quickly conclude on its cases against some of the crypto companies on whether they are securities or not so that it can start the regulation with a clear board which would be beneficial not just for the SEC but for the crypto industry as well.