The Texas State Securities Board has filed a cease and desist order against crypto lender BlockFi for failing to offer state or federal licensed security.
According to a filing on Thursday, the state regulator will hold a hearing into allegations that BlockFi illegally finances its crypto lending and proprietary trading operations through the sale of unregistered securities. If the judge accepts that the platform’s accounts generating interest on the crypto represent unlicensed securities, BlockFi may be subject to a cease and desist order.
If the judge made the order during the October 13 virtual hearing, BlockFi and its affiliates BlockFi Lending and BlockFi Trading would likely be required to stop offering BlockFi interest accounts in the state without registering with them. ” a local regulator or the United States Securities and Exchange Commission. The record claims that BlockFi manages more than $ 691 million in assets from approximately 25,000 Texas residents as of June 9.
Related: Texas Wants To Protect Privacy Of Blockchain Companies, Says Blockcap
The State Securities Board’s Texas Enforcement Division informed BlockFi on April 20 that it may not be in compliance with the state’s Securities Act with its interest accounts. He alleged in today’s filing that the BlockFi Interest Accounts violated Section 4.A of the Securities Act, stating:
“The mere fact that an investment is tied to a cryptocurrency, blockchain technology, or type of digital asset does not remove it from securities regulation if it constitutes an investment contract, a note, proof of indebtedness or some other type of security. “
BlockFi is already facing a cease and desist order from the New Jersey Bureau of Securities preventing it from onboarding new interest account clients. Today, the Alabama Securities Commission also issued an order granting the platform 28 days to justify why it should not face similar regulatory penalties for allegedly selling unregistered securities in Alabama. . The lending platform has claims the BlockFI interest account is not a security.
Related: Texas regulator allows state chartered banks to hold Bitcoin
With the exception of BlockFi, Texas has generally been a welcoming state for crypto and blockchain companies. Governor Greg Abbott has spoken openly about his support for local crypto and blockchain laws, as lawmakers passed a bill to recognize cryptocurrencies under state commercial law in June.
In addition, the state is already home to some large crypto mining companies, including Riot Blockchain, Argo Blockchain, and Blockcap. Cointelegraph reported last month that miners displaced by regulatory crackdown in China may turn to Texas given the state’s cheap electricity costs.