Kentucky Joins as the Fifth State To Inspect BlockFi

Kentucky Joins as the Fifth State To Inspect BlockFi

This is the fifth state in a month to scrutinize BlockFi as the firm violates the state security laws. Five states have issued cease-and-desist and show-case orders to BlockFi, which are New Jersey, Alabama, Texas, Vermont and now Kentucky joins the list.

The Kentucky Department of Financial Institutions has restricted the firm from opening new accounts, as BlockFi violates the security laws. Despite the fact that the company believes its interest account product is not a security, it has announced that it will no longer be available to new customers in Kentucky.

BlockFi is a crypto lending platform. It provides crypto savings accounts with rates of return that are significantly higher than those offered by FDIC-insured banks in the United States. Moreover, BlockFi is similar to banks, the firm earns money by lending funds deposited on its platform.

Additionally, the regulators have stated in the press release:

The website of ‘Blockfi’ offers cryptocurrency lending and borrowing services via ‘Blockfi Interest Accounts’ (BIAs) advertised on the website. Investors can use these accounts to deposit specific cryptocurrencies with the company in exchange for a set interest rate. Investors have placed nearly $15 billion in these accounts, which the company has accepted.

BlockFi – Not Fully Shutdown

However, the platform is not fully shutdown and the service of BlockFi is unavailable to new customers in the state. Existing customers will not be affected. Kentucky has joined Texas in requesting a cease-and-desist order, while New Jersey, Alabama, and Vermont have requested “show-cause” orders.

BlockFi has been criticized over claims for a month that BIAs breach security laws as the firm uses funds from customers and lends them for profit. Consequently, on the other-side, BlockFi maintains its BIAs and does not violate the law in the states where it operates.

Furthermore, other state regulators have given time for the crypto lender to provide evidence in support of its case. Despite the regulations, BlockFi was set to close its $500 million Series E funding round on July 27. However, it is unknown whether the funding was closed or not.

Recommended for You

A devoted content specialist who is inquisitive on exploring crypto and blockchain technology. She is fond of providing innovative contents that tugged her to write for NewsCrypto.