The United States Securities and Exchange Commission (SEC) is reportedly investigating BlockFi’s high yield cryptocurrency accounts.
A source familiar with the matter told Bloomberg today that the SEC is examining whether BlockFi’s crypto lending product, which gives customers a yield of up to 9.5% annual returns, is a security.
Although the source said the regulator is still investigating the matter, there is no guarantee that the SEC may proceed with further action.
It is not clear whether BlockFi’s crypto lending product is a security but the SEC has noted that whenever clients invest their money in a firm with the hope of making gains, then it falls under its regulatory purview.
The development comes after some U.S. states like New Jersey and Texas have taken stringent action against the crypto company, with the former requesting that BlockFi stop servicing clients within its jurisdiction.
BlockFi Crypto Lending Product
Launched in 2017, BlockFi offers several crypto-related services to its clients, such as trading accounts and loans, which allow customers to borrow money against their crypto assets.
According to the platform, it has over one million verified users, with over $10 billion worth of cryptocurrencies in deposit.
SEC View on Crypto Lending Products
Before now, SEC chair Gary Gensler has asserted that several crypto firms are promoting and selling products that should be registered with the SEC.
According to Gensler, many of these firms have refused to register their products with the Commission because they fear increased regulatory oversight.
Firms offering cryptocurrency lending products have been urged by Gensler to discuss with the agency how they should be regulated, while the SEC is still preparing a framework for a crackdown behind the scenes.
Per the source, the SEC has issued several requests for information to crypto-related firms, especially those offering lending products in decentralized finance (DeFi).
In September, the industry saw a glimpse of the SEC’s stance on crypto lending products when Coinbase CEO stated that the agency had threatened a lawsuit against the firm should it proceed to launch its lending product.
The development prompted the San Francisco exchange to officially cancel the launch of the product due to fears of sanctions from the government.