By Jonathan Stempel
– New Jersey ordered the cryptocurrency platform BlockFi Inc to stop offering interest-bearing accounts that have raised $14.7 billion from investors, the state’s acting attorney general said on Tuesday.
A cease and desist order from New Jersey’s Bureau of Securities said BlockFi’s accounts were not registered with that office or exempt from registration, and their sale violated New Jersey securities laws.
Andrew Bruck, the acting attorney general, said the enforcement action against Jersey City, New Jersey-based BlockFi came amid concern about the growth of decentralized finance platforms for investors in digital assets.
According to the order, investors can buy BlockFi Interest Accounts by depositing cryptocurrencies such as Bitcoin and Ethereum with the company, which uses them to fund lending operations and proprietary trading.
The order said BlockFi offers yields from 0.25% to 7.5%, depending on how much and which assets are deposited.
In contrast, the average interest rate for savings accounts nationwide was 0.06% on June 30, according to Bankrate.com. BlockFi’s accounts lack federal deposit insurance.
“Our rules are simple: if you sell securities in New Jersey, you need to comply with New Jersey’s securities laws,” Bruck said in a statement. “No one gets a free pass simply because they’re operating in the fast-evolving cryptocurrency market.”
The order takes effect on July 22, and does not affect existing BlockFi Interest Accounts. Bruck said BlockFi does not offer the accounts in New York and some other jurisdictions.
BlockFi said in a statement it disagreed with the order because the accounts were not securities.
It also said it remained fully operational for existing New Jersey clients, and believed its products are “lawful and appropriate for crypto market participants.”
In March, BlockFi said it completed a $350 million funding round that valued the company at $3 billion.