Vermont is the fourth state to order the termination of BlockFi’s interest-bearing savings account operations.
Vermont regulators have aligned themselves with the demands of New Jersey, Alabama and Texas. Last week, regulators in these states launched investigations against BlockFi and its two subsidiaries, BlockFi Lending and BlockFi Trading.
Financial regulators argue that BlockFi interest-bearing accounts that advertise high returns to cryptocurrency depositors are tantamount to unregistered securities. Securities include investment contracts. Their sale in the United States must be registered with the Securities and Exchange Commission (SEC).
BlockFi denies the claims and argues that the cryptocurrency is not recognized as legal tender, is not supported by the government, and the BlockFi interest account is not a bank or brokerage account.
A BlockFi account is not subject to FDIC insurance, SIPC securities investor protection, or other similar protections. Interest rates, withdrawal limits and commissions are subject to change and are largely dictated by market conditions. This is not a risk-free product and the loss of the principal invested is possible.
Chronology of events
It all started last Monday when New Jersey’s attorney general ordered BlockFi to stop attracting new customers. The order did not stop BlockFi from serving existing customers in the state.
On Wednesday, Alabama regulators warned BlockFi about preparing a cease-and-desist order. The company has 25 days to make a convincing case.
And on Thursday, July 22, the Texas Securities Board (TSSB) handed the company a cease-and-desist order that could take effect after an October 13 hearing.
Thus, Vermont became the fourth state to issue an order restricting BlockFi activities under the clause on the placement of unregistered securities.
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