The California Department of Financial Protection and Innovation (DFPI) has announced that it is investigating some crypto interest account providers to see if they are operating within the law.
The DFPI has advised California residents to be careful of crypto-asset accounts that claim to offer interest, advising them to conduct due diligence before utilizing any platform. The California regulator disclosed that “crypto-interest account providers may not have adequately disclosed risks customers face when they deposit crypto assets onto these platforms.”
The California Department of Financial Protection and Innovation published a note to the public stating that interest-bearing crypto asset providers “are not subject to the same rules and protections as banks and credit unions.” According to the note, the market conditions were making some platforms “prevent clients from withdrawing from and switching between their accounts.”
In its note to the public, the California regulator disclosed,
“The Department warns California consumers and investors that many crypto-interest account providers may not have adequately disclosed risks customers face when they deposit crypto assets onto these platforms. Crypto-interest account providers are not governed by the same rules and protections as banks and credit unions, which are required to have deposit insurance.”
They added, “Consumers are encouraged to exercise extreme caution before responding to any solicitation offering investment or financial services.”
According to the California Department of Financial Protection and Innovation, some account providers offer securities to the public without seeking approval from the authorities. The regulator has ordered Voyager and BlockFi to cease offering their unregistered securities to California residents.
The California regulator issued BlockFi a cease-and-desist order.
“On February 14, 2022, BlockFi agreed to cease offering and selling BIAs nationwide to new investors in the United States and cease and desist accepting further investments or funds in the BIAs by current U.S. investors, including in California.”
BlockFi agreed to refrain from offering unregistered securities.
“BlockFi and BlockFi’s parent, BlockFi Inc., further undertake and agree to desist and refrain from offering or selling BIAs or any security that is not registered, qualified, or exempt to new investors in the United States and to desist and refrain from accepting further investments or funds in the BIAs by current U.S. investors unless and until the offer and sale of the BIAs or other securities have been qualified by the Commissioner or are otherwise exempt or not subject to qualification.”
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