Regulators have put the crypto segment under scrutiny to protect consumers and the FIAT banking sector. Bloomberg reported that the crypto lender BlockFi agreed to pay $100 million to settle allegations from the U.S. Securities and Exchange Commission (SEC) and state regulators that it illegally offered a product that pays customers high-interest rates to lend out their cryptos. The company has been under investigation since at least Nov 2021 over the lending product, which offers yields as high as 9.5%.
BlockFi (https://blockfi.com) headquartered in Jersey City, New Jersey, will pay a $50 million fine to the SEC and another $50 million to various states. It’s among several digital assets services providers, including Celsius Network and Gemini Trust, which have become popular with retail investors for paying yields that sometimes exceed 10% in a negative FIAT interest environment. In September 2021, the SEC has also warned Coinbase that it would sue if the company moved forward with a lending product.
The U.S. entities BlockFi Trading LLC and BlockFi Lending LLC hold different licenses in the U.S. BlockFi International Ltd. in Bermuda is licensed by the Bermuda Monetary Authority to conduct digital assets business.
SEC’s scrutiny has been mounting on crypto lenders, which have attracted tens of billions of dollars in deposits by promising yields that far exceed those available through traditional savings accounts. As part of its settlement with regulators, BlockFi allegedly will no longer be able to open new interest-yielding accounts for U.S. residents.
