US Regulators Fine Crypto Interest Generating Products
Cryptocurrency is still under a series of doubts with respect to rules, regulations and legalities. Companies dealing in the segment are perplexed. State governments in the United States have fined them $100 million for allowing customers to hold the coins and earn interest instead of trading.
BlockFi, a cryptocurrency company based in New Jersey, agreed to pay the amount last February as a settlement with the state authorities and SEC as these argued that interest-bearing product should be registered as it is categorized as security.
Many related companies said the rules are not clear and they are not aware of when to register such offerings. The interest-bearing cryptocurrency offering is gaining immense popularity in the country. It was first launched in 2021.
Most companies tried structuring the products to avoid the registration process and now it is viewed as a clash with the authorities amid increased scrutiny of the segment.
Meanwhile, BlockFi said to be coming up with a new similar product and it would be properly registered. Its deal with the SEC is learned to be providing a roadmap for companies offering similar products.
BlockFi spokesperson said their resolution with the agency is considered a key step in achieving regulatory clarity as well as to understand the crypto ecosystem. These measures are important for mass adoption of the segment in the long run.
Meanwhile, experts believe the SEC should define first the details to set boundaries instead of using enforcement actions.
Securities in the US are regulated strictly and a clear definition and other details are outlined in the 1933 Securities Act.
Gemini cryptocurrency exchange said the settlement has not affected them as its similar product has been approved by the financial services department in New York.
Several cryptocurrency companies are currently exploring various aspects of the sector to lure more customers.