Bloomberg: SEC opens investigation into BlockFi

The U.S. Securities and Exchange Commission (SEC) has opened an investigation into the crypto-lending platform BlockFi. The regulator is examining the legality of offering the BlockFi Interest Account BIA without registration with the agency, according to Bloomberg, citing people familiar with the matter.

A person familiar with the matter said the SEC’s inquiry centers on the instrument’s classification. The commission believes that BIA may bear the hallmarks of a security, and thus its offer to customers would need to be registered.

According to BlockFi’s site, the BIA offers an annual yield of 9.5% — a figure that significantly surpasses the average rate for U.S. bank savings accounts (0.06%).

In the agency’s view, when a consumer puts their money into a ‘common enterprise’ (common enterprise) and expects to profit, the participants in the deal enter into an investment contract. The latter falls under the SEC’s jurisdiction.

Previously, BlockFi faced state-level regulatory action. In July, the New Jersey Bureau of Securities banned BlockFi from opening new accounts for its residents.

Subsequently, Alabama regulators charged the company with selling unregistered securities. Soon it emerged that BlockFi’s activities were being scrutinised in Vermont.

In September, the platform’s chief Zach Prince stated that the company’s interest-account services do not fall under securities laws. He said the company does not intend to make decisions based on the views of state regulators — everything depends on federal authorities.

In the same month, the SEC warned the bitcoin exchange Coinbase of potential litigation if it launches crypto-savings accounts based on USD Coin (USDC). Subsequently, the company abandoned its plans.

Bloomberg’s sources said that Coinbase and BlockFi are not the only ones facing pressure from the SEC. In recent months, the agency allegedly sent ‘dozens of subpoenas and requests’ to various crypto companies. Some of these letters relate to lending products, and some to DeFi-platforms.

In all cases, the regulator is focused on a single question — whether a given instrument is a security.

Earlier, BlockFi filed with the SEC to launch an exchange-traded fund (ETF) based on bitcoin futures.

In November, the company filed to launch a physically-backed bitcoin ETF.

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