BlockFi has received another cease and desist order for offering unregistered securities; this time, in the state of Kentucky.
The Kentucky Department of Financial Institutions (DFI) issued the cease and desist order on July 29th and unlike the cease and desist that the New Jersey Attorney General issued to BlockFi, the letter from Kentucky specified why they believed BlockFi Interest Accounts are unregistered securities.
“A recent DFI investigation found Blockfi is offering securities in the form of investment contracts in relation to the deposit of virtual currencies with the company. The firm, which is headquartered in New Jersey, has not registered these securities with the Kentucky DFI or the Securities and Exchange Commission, as required by law,” said the official statement.
Kentucky is the 5th state to take action against BlockFi over its Interest Accounts. New Jersey, Vermont, Alabama, and Texas have all issued show-cause orders–a court order that requires its recipient to justify, explain, or prove something to a court–or cease and desist orders against BlockFi.
A precedent for DeFi companies
When BlockFi received the cease and desist order from Kentucky’s DFI, it responded in the same way that it did to the four other states that have addressed BlockFi Interest Accounts–by stating that BIA’s are not unregistered securities.
“We firmly believe that BIA is lawful and appropriate for crypto market participants, and we remain steadfast in our commitment to fight for consumer rights to earn interest on their crypto-assets,” said BlockFi.
“But in light of the order [from Kentucky], BlockFi will stop accepting new BIA clients residing in KY immediately.”
BlockFi has a finite amount of time to respond to the show cause orders in Vermont, Alabama, and Texas, and until September 2nd before the cease and desist order in New Jersey becomes effective.
Financial regulators around the world at the local, state, and federal levels are taking a closer look at the emerging blockchain and digital currency industry. Policymakers are creating laws and regulations that mitigate the amount of risk that their citizens and residents face when putting money into the blockchain and digital currency markets.
Never before have we seen regulators scrutinize a digital currency company for a decentralized financial product that allows individuals to earn interest on the digital currency they stake on the platform. The outcome of these court orders against BlockFi and its Interest Accounts is bound to set a precedent for the industry and the companies that provide similar services.
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