BlockFi, a crypto company, reaches $100 million settlement for failing to register loan products.

The Securities and Exchange Commission has reached a $100 million settlement with BlockFi Lending over registration failures, the first since the regulator warned last fall that it would take action against cryptocurrency firms offering lending products that have not registered them as securities or have not registered as an investment. businesses.

“Today’s regulations make it clear that crypto markets must comply with proven securities laws, such as the Securities Act of 1933 and the Investment Companies Act of 1940,” SEC Chairman Gary Gensler said in a statement Monday.

Since March 2019, New Jersey-based BlockFi has offered its customers the ability to lend digital assets to the company and earn interest on those loans, the commission said. Regulators said the scheme was essentially an investment contract, in which customers loaned their money with the promise that they would be repaid later. BlockFi should have registered them as securities and should have registered as an investment firm, the SEC found.

While the settlement was the first of its kind, the threat of SEC scrutiny had already derailed plans by Coinbase, the largest US-based cryptocurrency exchange, to launch a similar lending product. . Coinbase executives argued that its new product shouldn’t be considered a security, but they canceled plans for an interest-bearing Lend product in September.

BlockFi chief executive Zac Prince said the settlement was a step forward.

“Today’s milestone is another example of our pioneering efforts to ensure regulatory clarity for the entire industry and our customers, just as we did for our first product – crypto lending. “, Mr. Prince said in a statement.

BlockFi was preparing to offer a new version of its lending product called BlockFi Yield that would follow SEC rules, Prince said.

“We intend BlockFi Yield to be a new interest-bearing crypto security, registered with the SEC, that will allow clients to earn interest on their crypto assets,” he said.

The company said existing customers of its current loan product, BlockFi Interest Accounts, would be able to keep their loans open and earn interest as usual, but they would not be able to add to their positions. The company also said it would stop offering this product to new US customers. BlockFi has 60 days to meet SEC registration requirements.

Half of the $100 million settlement will go to the SEC, while the other half will go to 32 states where regulators had made similar charges against BlockFi, the commission said.

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