BlockFi CEO Zac Prince confirmed earlier this week that the company received a cease-and-desist order from the New Jersey Bureau of Securities
According to BlockFi CEO Zac Prince, the New Jersey Bureau of Securities (NJBoS) has instructed the crypto lending company to stop offering interest-bearing crypto accounts to new customers residing in New Jersey. The company, which operates in New Jersey, has offered the BlockFi Interest Account (BIA) since 2019. Prince clarified that the order does not affect existing customers, so current account holders retain full access to all parts of the BlockFi platform.
“We remain fully operational for our existing customers in New Jersey. All aspects of the BlockFi platform continue to be available to our customers in New Jersey. The order provides that BlockFi may not accept new BIA customers residing in New Jersey as of July 22, 2021,” Prince said.
He reiterated that BlockFi intends to cooperate with regulators to explain its products, which the company maintains are compliant and appropriate. Prince also disputed the NJBoS’s characterization of the BIA as a security, calling that assessment incorrect, and emphasized that the company will continue to protect customer interests.
New Jersey’s Deputy Attorney General Andrew Bruck said the order was issued in response to the sale of unregistered securities, which he asserted violates New Jersey securities laws. He explained that the state has been closely monitoring the crypto sector to ensure compliance with investor protection laws and warned that no market participant is exempt from the law.
“No one gets a free pass simply because they operate in the fast-evolving cryptocurrency market,” Bruck said.
Bruck noted that BlockFi does not offer the interest-bearing crypto accounts in certain other states, such as New York, and suggested that differing state laws may explain that limitation. Following the announcement, Kaitlin Caruso, acting director of the Division of Consumer Affairs, commented that certain decentralized finance (DeFi) products present significant risks—potentially greater than volatility-driven crypto risk alone. She warned that, despite some crypto firms appearing similar to traditional financial platforms, they can leave investors unprotected and vulnerable.
The New Jersey order was met with criticism from some users who insisted BlockFi’s interest accounts did not involve securities. Others suggested the state action may have been intended to protect banks. After New Jersey took action against BlockFi, the Alabama Securities Commission followed suit. Yesterday, the Alabama commission ordered BlockFi to “show cause” or face the risk of being barred from offering unregistered securities in that state.