Blockfi Ordered to Stop Offering Interest-Bearing Crypto Accounts in New Jersey

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On July 19, the CEO of the crypto financial services firm Blockfi, Zac Prince, told the public that the New Jersey Bureau of Securities has told the company to “stop accepting new BIA clients residing in New Jersey beginning July 22, 2021.” New Jersey’s acting attorney general Andrew Bruck also tweeted about the issue and said “we’ve been closely monitoring activity involving cryptocurrencies for compliance.”

New Jersey’s Bureau of Securities Cracks Down on Crypto

On Monday, an unpublished draft of a cease and desist order was discovered by the Forbes staff writer Michael del Castillo. The order was sent to the crypto-financial services firm Blockfi, a company that provides users with interest-bearing crypto accounts and crypto debit cards. The same day, Blockfi’s CEO Zac Prince confirmed the cease and desist order from the New Jersey Bureau of Securities (NJBoS) was real.

“Late Monday evening Blockfi received an order from the New Jersey Bureau of Securities regarding Blockfi Interest Account (BIA) operations in the State of New Jersey,” Prince tweeted on Monday. “We remain fully operational for our existing clients in New Jersey. All aspects of the Blockfi platform continue to be accessible to our clients in New Jersey. The order calls for Blockfi to stop accepting new BIA clients residing in New Jersey beginning July 22, 2021,” Prince added.

The following day, New Jersey’s acting attorney general Andrew Bruck also tweeted about the situation and shared a press release stemming from the Garden State’s financial authorities. “We’ve been closely monitoring activity involving cryptocurrencies for compliance with NJ’s investor protection laws. Our Bureau of Securities ordered a NJ-based company – Blockfi – to stop offering interest-bearing accounts,” Bruck said on Tuesday.

A number of cryptocurrency supporters were displeased by the state of New Jersey’s actions and responded to Bruck’s tweet. “None of the cryptos offered on Blockfi represent ownership in a company or anything else,” one individual remarked. “They are just commodities. This makes absolutely 0 sense to the point that it’s laughable. Did the NJBoS do its homework before doing this or does it just not like cryptocurrency?”

The press release published by the New Jersey attorney general’s office explains that the entity is stepping up to “protect investors” as new financial service business models come under scrutiny. “Our rules are simple: if you sell securities in New Jersey, you need to comply with New Jersey’s securities laws,” said the acting attorney general Bruck. “No one gets a free pass simply because they’re operating in the fast-evolving cryptocurrency market. Our Bureau of Securities will be monitoring this issue closely as we work to protect investors.”

“Cryptocurrency investment products offered and sold on decentralized finance platforms carry significant risks, even beyond those associated with the volatility of cryptocurrency,” Kaitlin Caruso, acting director of the New Jersey Division of Consumer Affairs stressed. “Platforms like Blockfi may mirror the traditional financial structures that we know and trust, but in reality, they can leave investors extremely vulnerable.”

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