California probes Voyager, BlockFi and other crypto lenders

The California Department of Financial Protection and Innovation (DFPI) is investigating offers of interest-bearing cryptoasset accounts as part of a broader review of cryptocurrency lending platforms.

The state regulator has yet to accuse any crypto firm of wrongdoing or press charges. Instead, the DFPI checks whether its DeFi and lending products should be registered as securities.

“The Department is warning California consumers and investors that many crypto interest account providers may not have adequately disclosed the risks customers face when depositing crypto assets on these platforms. Providers of crypto interest accounts are not governed by the same rules and protections as banks and credit unions, which are required to have deposit insurance,” the DFPI said.

The securities regulator also said it was reviewing Voyager Digital, the Canadian crypto investment firm, and BlockFi for its offering of interest-bearing crypto accounts. The department found that some crypto interest accounts were unregistered securities.

“The purpose of securities registration, in part, is to ensure that investors receive all important information necessary to assess whether to enter into these crypto interest account agreements, such as the risks taken with the funds deposited. “, he added.

Crypto Lenders Fall Under the Microscope

The effort continues a year-long battle waged by California and other state watchdogs to bring crypto interest accounts under their regulatory domain. BlockFi was the first lender to fall under their microscope and it eventually settled with state and federal regulators.

The crypto lending platform, backed by billionaire Mike Novogratz’s Galaxy Capital, settled a $1 million administrative fee with the Iowa regulator last month without admitting or denying the charges. BlockFi also agreed to pay a $50 million fine to the SEC and additional fines of $50 million to 32 states to settle similar charges.

The move comes as US regulators signaled a big shift in oversight of cryptocurrencies and the growing Defi sector after blocking Coinbase from launching a new crypto lending product. SEC officials are increasingly talking about the need to crack down on these products, which are essentially unregistered interest-bearing accounts, the agency says.

Prior to the recent crisis, the use cases presented by major players reflect that lending trends are moving towards a reliance on digital assets to support business operations rather than just betting on short-term price movements. Specifically, there was substantial interest from institutional players to borrow in order to facilitate a specific strategy, for example for shorting, arbitrage or working capital purposes.

SEC Chairman Gary Gensler called on Congress to give the agency more power to better control crypto trading and lending platforms, which pay customers higher rates than most crypto accounts. bank savings.

About Jermaine Chase

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