Blockfi Survived! Well... Partly

By TheWriteVictor | The World of Crypto | 13 Feb 2022

Somebody's In Trouble...

For those of you who don't know what Blockfi is, it offers loans, has a Visa credit card, and features high yield interest accounts for 8 different cryptocurrencies. Not staking, high yield interest accounts. And that distinction is why they've been under investigation by the SEC for 6 months.

They aren't the only ones under investigation for offering financial services that straddle the border between what the US Government determines as securities and digital assets. The SEC is reportedly also looking into the activities offered by Gemini and the Celsius Network, the latter of which also provides high-interest rates for crypto deposits that aren't technically staking.

Back in September Blockfi members started receiving emails from Zac Prince, CEO of Blockfi, discussing "Regulatory Updates", which involved the New Jersey Board of Securities'' investigation into Blockfi's interest accounts and whether they're labeled correctly. For Blockfi's part, each email was to notify members that the NJ Board was issuing an extension of their cease and desist order, a sign that Blockfi was in constant talks with not just New Jersey, but regulators from Texas, Vermont, and Kentucky. Over the months it went from just a state problem to a federal problem.

Gentlemen, We Have A Solution

The good news is Blockfi has reached a settlement with the SEC and a few state regulators. The deal sees Blockfi paying $100 million, half to the SEC and the other half to states that had beef with them. The settlement also has Blockfi shuttering their interest accounts to any new American users. They report that existing interest account members will not be affected, but no one else can sign up.

“We have been in productive ongoing dialogue with regulators at the federal and state level. We do not comment on market rumors. We can confirm that clients’ assets are safeguarded on the BlockFi platform and BlockFi Interest Account clients will continue to earn crypto interest as they always have.”
Madelyn McHugh, Blockfi Spokeswoman

The settlement isn't quite official yet, though it is expected to go through sometime this coming week.
Blockfi operates in most countries around the world, though each country's experience will be different based on its regulatory framework. Blockfi offers a maximum of 13 different crypto assets to purchase or loan or hold on their platform, but in America, they only offer 8, and they don't even operate in New York, New Mexico, Vermont, West Virginia, or Arizona.
It's likely the platform will pivot in a way that allows them to focus on their other services more. For example, their Visa credit card, which is widely accepted as one of if not the top tier of crypto credit cards, allowing you to choose which crypto you gain rewards in. They will most likely continue to operate within each country's discretion, and this is just them bending the knee to Lord America.

Not Over Yet

As the SEC continues to ramp up its investigations into cryptocurrencies and their various platforms, this $100 million from Blockfi may end up looking like a slap on the wrist compared to some settlements in the future. Bloomberg was the first to report the coming settlement.

I'm not entirely sure what this Blockfi referral link would be good for, but... try it out? It won't help you with an interest account, but if you're looking to sign up for their Visa card, perhaps it'll give you a bonus. God speed.

Are you worried about your Blockfi holdings? Are you thinking of transferring out as they becoming increasingly like a traditional bank? Are you a user of the Celsius Network and have anything to share?