When BlockFi enticed people to sign up for its services with a lending product that yielded as high as 9.5%, it caught the Securities and Exchange Commission’s attention.
BlockFi’s fine of $50 million is the first step to government regulations for the crypto lending market. Blockfi will also pay another $50 million to state regulators. BlockFi’s spokesperson said in a statement that the firm safeguarded client assets on its platform. Clients will still earn crypto interest.
The settlement might foreshadow what Voyager Digital’s (VYGVF) settlement will cost. The SEC is also investigating Celsius Network and Gemini Trust.
Positive Turning Point
The SEC settlement removes uncertainties in the crypto market. The regulator will start treating accounts on crypto lending platforms as securities. With that characterization, companies will need to register those securities with regulators.
Other crypto lenders will need to adhere to the new regulations. This will add a layer of regulatory compliance. It will add costs for crypto-based platforms, slowing their operating profit growth.
The industry needs higher oversight to protect customers. It is a step closer to legitimizing the crypto market. Previously, crypto companies grew too fast. They added financial services and acted like regular banks and brokers. This shortcut undermines the rules that traditional financial institutions must follow
