The state of Alabama has become the second state in the United States to express concerns over BlockFi, a leading cryptocurrency lending platform.
The Alabama Securities Commission (ASC) has issued a show-cause order to New Jersey-based company BlockFi, ASC director Joseph Borg officially announced Wednesday.
The regulator said that already facing a cease-and-desist order from the New Jersey Bureau of Securities, BlockFi now has 28 days to explain why the platform should stop selling “unregistered securities” in Alabama and stop. should not be forced, the regulator said.
According to the ASC, BlockFi’s interest-earning cryptocurrencies are BlockFi interest account securities. “BlockFi has raised at least $14.7 billion worldwide through the sale of these securities,” the regulator claimed.
The ASC alleged that BlockFi, along with its affiliates BlockFi Lending and BlockFi Trading, is funding its crypto lending operations “at least in part” through funds generated from the sale of unregistered securities in violation of securities laws. doing business. The order also claimed that BlockFi failed to inform investors that its BIA has not been approved by the ASC or any other securities regulator, despite the firm describing itself as a “US regulated entity”. .
BlockFi later said that the company was aware of the ASC’s show-cause order, assuring that it is engaged in “active dialogue with regulators around the world,” including those in Alabama. With the firm confident that its products are legitimate and suitable for crypto market participants, BlockFi said, “Our stance has not changed – BlockFi is not an interest account security.”
[1/1]We are aware of the show cause order issued by the Alabama Securities Commission. We have active dialogue with regulators around the world, including Alabama, to share details about our products that we think are legitimate and appropriate for crypto market participants.
— BlockFi (@BlockFi) 21 July 2021
The ASC said the action comes amid growing concerns over the growing popularity of decentralized financial platforms such as BlockFi, which are designed to provide financial services without relying on centralized financial intermediaries.
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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 high risk of loss, the authority noted.
The ASC’s action comes two days after the New Jersey securities regulator issued a cease-and-desist order to BlockFi, barring the platform from adding new interest account customers in the state.