On July 22, the order to cease their activities regarding the receiving of new clients in New Jersey will take place. Authorities would consider BlockFi a decentralized finance platform.
The BlockFi platform is struggling with an order from the Stock Exchange Bureau of the state of New Jersey, United States of America, to no longer accept residents of this jurisdiction as users of its service. This service focuses on loans and exchanges with cryptocurrencies and brings interest and other beneficial features to customers.
Initially, Forbes advanced information through a report, focusing on an unpublished draft of the order. Zac Prince, CEO of BlockFi, came with a series of Tweets explaining that, in effect, they had been ordered not to accept any more New Jersey resident clients for their interest-bearing account service.
However, they will keep on serving the residents of that state who already have an account, and desire to generate interest on the platform (BlockFi Interest Account)
On July 20, the New Jersey State Department of Legal and Public Safety stated a press release on behalf of Acting Attorney General Andrew J. Bruck, BlockFi, who announced the creation of this order addressed to BlockFi.
Among the reasons mentioned for ordering to stop offering the service in this jurisdiction, there is the fact that BlockFi has supported its operations with cryptocurrencies through the unregistered or authorized sale of securities, following federal law on the matter.
Old rules for a new investment model
A team of New Jersey federal prosecutors and legal representatives researched the BlockFi model, and their impressions also appear in the announcement of the order.
As stated in the note, BlockFi would take cryptocurrencies such as BTC and ETH from its users’ accounts, and it would confer them to other clients. For this reason, BlockFi gives back to its customers a percentage of interest or profitability every month.
Authorities highlight that the interest rates offered by BlockFi to its clients are higher than those offered by traditional financial services and banks.
The weak point of this model would reside in the volatility of cryptocurrencies, said Kaitlin Caruso, acting director of the Bureau’s Division of Consumer Affairs. According to him, BlockFi users could suffer exposure to sudden price changes.
In addition, the authorities point out that BlockFi has not registered its BlockFi Interest Accounts service with any regulatory entity. However, this kind of service is not exempt from legal registration with various entities.
Much to the dissatisfaction of the authorities, they accuse BlockFi of telling its users not to inform the entities first before their customer service about any incident or complaint.
So Zack Prince, previously mentioned as CEO of BlockFi, ended his comments on Twitter highlighting his disagreement with the authorities about not considering the BlockFi Interest Account as a security or stock market asset.
He said that BlockFi is committed to engaging with regulators to help them understand their products, which they consider legitimate and appropriate for crypto market participants.
By: Jenson Nuñez
