After State Regulators, Now The SEC is Scrutinizing BlockFi for Offering Yield Much Higher Than Banks’ 0.06%
The US Securities and Exchange Commission (SEC) is now scrutinizing crypto lender BlockFi over its yield generating account that offers as much as 9.5% annual yield, which dwarfs the 0.06% average interest rate for bank savings accounts.
Unlike bank deposits, crypto accounts aren’t insured by the federal government, which is one of the regulators' concerns.
The securities regulators at the state level have launched a broad examination of crypto lending firms that includes Celsius Network. In July, New Jersey’s Bureau of Securities demanded that BlockFi cease and desist from offering its accounts. Kentucky took a similar action, while authorities in Texas, Alabama, and Vermont told the firm to demonstrate why their states shouldn’t ban its lending product.
But BlockFi believes “it is lawful and appropriate for crypto market participants” and has been saying that “appropriate regulation of this industry is key to its future success.”
Backed by Bain Capital and Tiger Global Management, BlockFi boasts over 500,000 retail accounts and was recently valued at more than $4 billion. Amidst the growing scrutiny, the company is on pace to make $475 million in gross revenue this year, as per BlockFi CEO and co-founder Zac Prince.
“Things aren’t slowing down,” said Prince during a recent interview at Bloomberg’s Financial Innovation Summit earlier this month.
The SEC is now reviewing whether the BlockFi accounts are securities and need to be registered with the regulator, reported Bloomberg, citing a person with knowledge of the matter.
The regulator, however, hasn’t accused the lender of any wrongdoing. Also, not all agency investigations lead to enforcement actions.
SEC Chair Gary Gensler, meanwhile, has repeatedly asserted that he believes crypto firms are selling products that should be registered with the agency. Cryptocurrency exchange Coinbase has already dropped its plans for its Lend product which would have paid a fixed 4% interest on crypto holdings after the SEC threatened to sue it.