To that effect, Gensler said that “decentralized finance platforms not only implicate securities laws-some platforms also can implicate the commodities laws and the banking laws. Many of the decentralized projects like Aave and Compound also offer yield-bearing instruments not dissimilar to BlockFi and Celsius’ services. SEC Chairman Gary Gensler has also turned his attention toward the fast-growing decentralized finance ( DeFi) space.
Meanwhile, Celsius, a company that also offers interest on crypto holdings, is likewise facing regulatory scrutiny in many of the same states that are taking aim at BlockFi.Ĭentralized companies aren’t the SEC’s only objective, however. The San Francisco-based company eventually backed down and did not launch the product. Like BlockFi’s BIAs, Earn would enable users to earn 4% interest on their USD Coin holdings. In September, the Commission threatened to sue Coinbase, according to CEO Brian Armstrong, if the company moved forward with its Earn product. This is not the first time the SEC has taken aim at the crypto lending and borrowing sector. Regulators in New Jersey, for example, ordered BlockFi to stop offering its products to residents of the state. If the commission determines that BIAs are indeed securities, then BlockFi would be operating without having first registered these products with the SEC.įinancial regulators in Texas, Alabama, New Jersey, Kentucky, and Vermont have all raised similar concerns around BlockFi’s products over the past several months. The SEC is now reviewing whether these interest-earning accounts, called “BlockFi Interest Accounts” or “BIAs,” are securities. BlockFi offers variable interest rates on several popular cryptocurrencies.
Deposits in Bitcoin earn yield at an interest rate of 4.5%. In early January, SEC Chairman Gary Gensler announced that crypto exchanges will face more SEC scrutiny. What’s more, the rate of return on the dollar-pegged cryptocurrencies far outpaces those of banks.Ĭurrently, users can earn 9.5% on their Tether holdings, for example. Even Coinbase came under SEC fire in 2021 over plans to launch a digital asset lending program. The New Jersey-based crypto company lets users lend and borrow a wide variety of cryptocurrencies, like Bitcoin and Ethereum, as well as stablecoins, such as USD Coin and Tether. BlockFi’s high-yield crypto savings accounts are facing increased pressure from regulators in the U.S., and now the Securities and Exchange Commission is also investigating the firm, according to Bloomberg.