Alabama Regulator Joins NJBS to Question BlockFi’s Ability to Provide BIA Services
Regulatory issues are quickly stacking up against major cryptocurrency company BlockFi. In a release by the Alabama Securities Commission (ASC), the crypto-facing company has a limited time to prove its innocence over the sales of unregulated securities.
BIAs Unregistered Securities
In a growing wave of crypto regulation, Alabama regulatory agency ASC has issued a show-cause order against BlockFi. According to the US regulator, BlockFi has allegedly sold unregulated securities without registering with the agency.
Made public in an agency release, ASC Chief Joseph Borg explained that the order is primarily aimed at clearing the air surrounding BlockFi’s interest-yielding accounts, BlockFi Interest Accounts (BIAs). According to Borg, BlockFi needs to explain why they should not be issued a cease and desist order from selling unregistered securities in Alabama.
According to the ASC, the company raised over $14 billion from selling these crypto-focused interest accounts. However, BlockFi did not register with any regulatory authority and violated the Securities Law by doing this.
“Most of those registered to sell securities live outside of Alabama, but anyone offering securities must be registered before making an investment offer to an Alabama resident,” Borg reiterated the agency’s stance.
BlockFi has been given 28 days to put up a good defense.
In a recent tweet, BlockFi asserted that its BIA products were not securities. Meanwhile, it assured users that it was presently dialoguing with regulators.
BlockFi Reeling From Regulatory Blows
This is the second regulatory clampdown BlockFi is battling with this month. In a July 19 report by Forbes, the New Jersey Bureau of Securities (NJBS) issued a cease and desist order against the crypto lending firm. The government agency also blocked BlockFi from onboarding any new customers to its platform.
Like the Alabama scenario, the NJBS alleged that BlockFi issued unregulated securities to its customers through its savings product. In a document supposedly authored by Attorney General Andrew J. Bruck, the Judge said that any company selling securities within its territories must comply with the States’ securities laws.
It also added that no company could sidestep this requirement even if they operated in the crypto space.
Company CEO Zac Prince confirmed this order and noted that the firm is in talks with regulators in the jurisdictions the company operates in. He also asserted that the BIA is not a security offering of any kind, and the company stands on this premise.
According to Prince, the NJBS initially wanted BlockFi to end its BIA product today, but the crypto firm convinced the regulator to shift it forward.
Crypto lawyer Preston Byrne noted that the regulatory action stems from the agency’s definition of BIA as a product and not a service.
World governments are gradually paying close attention to the booming crypto space. Beginning with China's crypto mining ban in its Inner Mongolia region, regulatory agencies like the UK's FCA sanctioned crypto exchange Binance.