TL; DR Breakdown
- The United States SEC is investigating BlockFi’s BIA account.
- The body frowns at BlockFi’s BIA account.
- SEC continues to look into lending and borrowing services.
Trading digital assets do not come without regulation as crypto exchanges try to maintain guidelines laid down by regulators. In a case where some of the guidelines are kicked against, a regulator has to step in to look into the issues surrounding it. In this case, it is the issue of the United States SEC against a crypto exchange, BlockFi. According to an article released by Bloomberg, the United States regulatory body is now looking into the affairs of the exchange.
United States SEC against BlockFi BIA account
BlockFi’s service allows traders to lend and borrow top digital assets like Bitcoin and Ethereum. Aside from the top two, traders can also carry out lending and borrowing on USDT and USDC. However, the sweet deal that users get from it is that their rewards on stablecoins are much better than what banks give. Presently, users of the exchange stand a chance to earn rewards worth 9.5% when they buy and hold stablecoins. If a trader deposits Bitcoin on the exchange, he will be open to earning a yield reward of about 4.5%.
The United States SEC is trying to determine if the accounts used to carry out such trades, BlockFi Interest Accounts, can be classified as Securities. If the United States SEC can establish that the accounts are Securities, BlockFi would have committed an offense of not registering them with the regulatory body. In the last few months, regulators across some notable U.S states have aired their concerns regarding the products. Regulators in New Jersey have gone a step further by ordering the exchange to halt the service across the state.
Clampdown on lending and borrowing services continues
This act by the United States SEC has shown that the regulators frown on the lending and borrowing sector of the crypto industry. In a statement by Brian Armstrong of Coinbase, the regulators said it would sue the exchange if it continues its Lend program. The Lend program and the BIA accounts offer the same services in the sense that holders of the dollar-pegged assets are open to earning as much as 4% on their assets. With the warning, Coinbase halted the program with no moves to continue it anytime soon.
A previous report stated that Celsius is also facing regulatory oversight with some of its products similar to BlockFi’s. However, the SEC is not only chasing after centralized exchanges as the Chairman of the body, Gary Gensler, previously hinted that the body will be looking into ways to regulate the DeFi sector. Many DeFi protocols offer the same service as BlockFi’s, a major concern for the United States SEC. Gensler mentioned that decentralized finance protocols might be breaking so many laws, including Banking, Securities, and Commodities laws.