The California Department of Financial Institutions (DFPI) warned in July that it would crack down on crypto interest account providers in the state.
The California Department of Financial Protection and Innovation (DFPI) has ordered MyConstant, a crypto lending platform, to stop offering a number of its crypto-related products due to alleged state securities law violations.
According to a press release issued on December 21, the DFPI has ordered MyConstant to “desist and refrain” from offering its peer-to-peer loan brokering service and interest-bearing crypto asset accounts, which it claims violate the California Securities Law and the California Consumer Financial Protection Law.
The DPFI claimed that MyConstant’s offering and sale of its “Loan Matching Service” peer-to-peer lending service violated one of the state’s financial codes.
MyConstant was also accused of “unlicensed loan brokering,” as the platform induced lenders to lend without proper licences.
The crypto lender’s fixed interest-beating crypto asset products, in which a customer deposits crypto assets (such as stablecoins and fiat) and is promised a fixed annual percentage interest return, were also a source of concern for regulators.
It claimed that MyConstant offered and sold unqualified, non-exempt securities in these instances.
In July, the regulator stated that it was looking into several crypto interest account providers to see if they were “violating laws under the Department’s jurisdiction.”
The DFPI first announced its investigation of MyConstant in a press release on December 5, stating that MyConstant is “not licenced” to operate in California.
The latest action comes only a month after the California-based company appeared to be in trouble, announcing on Nov. 17 that “rapidly deteriorating market conditions” had resulted in heavy withdrawals and that it was “unable to continue operating our business as usual.”
At the time, the platform said it had limited its business activity, including halting withdrawals, and that “no deposit or investment request will be processed at this time.”
Since then, the platform has been providing updates to users via its website, including an updated plan sent to users on December 15 that includes a financial overview, liquidation schedule, estimated recovery, and next steps.
At the time, the platform stated that it will continue to administer its crypto-backed loans, including ensuring borrower compliance, processing loan repayments, returning collateral (when loans are paid in full), and liquidating collateral in the event of default.