The state of Alabama has become the second state in the United States to raise concerns about BlockFi, a major cryptocurrency lending platform.
The Alabama Securities Commission (ASC) has issued a show of cause order to New Jersey-based company BlockFi, ASC Director Joseph Borg, officially Announced on Wednesday.
BlockFi already faces a cease-and-desist order from the New Jersey Bureau of Securities, and now has 28 days to explain why the platform should not be forced to cease and desist from selling “unregistered securities” in Alabama, the regulator said. .
According to the ASC, BlockFi interest-bearing cryptocurrency accounts of BlockFi constitute securities. “BlockFi has raised at least $ 14.7 billion worldwide through the sale of these securities,” the regulator stated.
The ASC alleged that BlockFi, along with its affiliates BlockFi Lending and BlockFi Trading, has been financing its crypto loan operations and trading “at least in part” through funds generated from the sale of unregistered securities in violation of securities laws. . The order also stated that BlockFi has not disclosed to investors that its BIAs are not approved by the ASC or any other securities regulator despite the company promoting itself as a “US regulated entity.”
BlockFi later said the company was aware of the ASC’s show of cause order, saying it has been involved in “active dialogues with regulators around the world,” including those in Alabama. The firm remains confident that its products are legal and appropriate for cryptocurrency market participants, BlockFi said, adding: “Our stance has not changed: BlockFI’s interest account is not a security.”
[1/1]We are aware of the order to show cause issued by the Alabama Securities Commission. We are in active dialogues with regulators around the world, including those in Alabama, to share details about our products, which we believe are legal and appropriate for cryptocurrency market participants.
– BlockFi (@BlockFi) July 21, 2021
The ASC said the action comes amid growing concern over the growing popularity of decentralized financial platforms like BlockFi, which are designed to provide financial services without relying on central financial intermediaries.
Related: World Economic Forum Releases Policy Toolkit for DeFi Regulations
Unlike traditionally regulated banks and brokerages, investor funds are not protected by the Federal Deposit Insurance Corporation or the Securities Investor Protection Corporation, posing a higher 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, blocking the platform from incorporating new interest account clients in the state.