New Jersey Slaps Cease-and-Desist Order on Digital Asset Wealth Manager, Says DeFi’s Risks Outweigh Crypto Volatility
The New Jersey Bureau of Securities is calling on the crypto wealth manager BlockFi to stop offering interest-bearing accounts.
Acting Attorney General Andrew J. Bruck announced today that the Bureau of Securities issued a cease-and-desist order against BlockFi in an effort to protect investors.
According to the Bureau’s order, BlockFi has been funding its cryptocurrency lending operations and trading at least in part through the sale of unregistered securities.
“Our rules are simple: if you sell securities in New Jersey, you need to comply with New Jersey’s securities laws.
No one gets a free pass simply because they’re operating in the fast-evolving cryptocurrency market. Our Bureau of Securities will be monitoring this issue closely as we work to protect investors.”
The Bureau’s actions are a reflection of their concerns about platforms like BlockFi that “seek to reinvent traditional financial systems such as banks and brokerages for digital asset investors.” The Bureau stresses that investors’ losses are not insured by the Federal Deposit Insurance Corporation (FDIC) or Securities Investor Protection Corporation (SIPC).
Kaitlin Caruso, Acting Director of the Division of Consumer Affairs, emphasizes these risks.
“Cryptocurrency investment products offered and sold on decentralized finance platforms carry significant risks, even beyond those associated with the volatility of cryptocurrency.
Platforms like BlockFi may mirror the traditional financial structures that we know and trust, but in reality they can leave investors extremely vulnerable.”
BlockFi responded to the Bureau’s order on Twitter.
“BlockFi has been engaged in an ongoing dialogue with regulators to help them understand our products, which we believe are lawful and appropriate for crypto market participants.
BlockFi Interest Account (BIA) is not a security, and we therefore disagree with the action by the New Jersey Bureau of Securities. We remain fully operational for our existing clients in New Jersey. All aspects of the BlockFi platform continue to be accessible to our clients in New Jersey.
The order calls for BlockFi to stop accepting new BIA clients residing in New Jersey beginning July 22, 2021. We will continue to engage with all relevant authorities to protect our clients’ interests and ensure that our products remain available.”
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