Two weeks ago, BlockFi received a hefty fine from Iowa’s regulator, but now it has secured a licence.
BlockFi, a cryptocurrency lending platform, declared on June 28 that it had been granted a Money Services License in Iowa, just two weeks after being penalised by Iowa regulators for marketing and selling unregistered securities.
The crypto lender will be able to buy and sell payment instruments in Iowa thanks to the state’s licence. BlockFi announced on Twitter that it will start by enabling stablecoin trading for citizens of Iowa.
BlockFi was previously penalised more than $943,000 for violations of the state’s Securities Act on June 14 by the Iowa Insurance Division (IID), which oversees securities transactions in the state. In addition to failing to register as a broker-dealer or agent, IID said BlockFi had “offered and sold securities in Iowa that were neither registered or permitted for sale in Iowa.”
The United States Securities and Exchange Commission (SEC) levied a bigger penalties in February for failing to register an offering of high-yield interest accounts that it believed to be securities.
One of the highest fines ever levied against a crypto company by a federal agency. BlockFi was slammed with settlements totaling $100 million, of which half was paid to the SEC and the other half to 32 states that had filed identical complaints.
Shortly after, BlockFi declared that it would replace its present interest account offering by registering with the SEC for a cryptocurrency interest-bearing asset for its American clients.
The new licence represents a ray of hope for BlockFi, which has struggled alongside other blockchain and cryptocurrency businesses due to the deteriorating market circumstances and declining cryptocurrency values.
When venture capital firm Three Arrow Capital (3AC) failed to meet a margin call on its borrowings of Bitcoin (BTC) on June 16, BlockFi was one of the lending companies forced to liquidate some of its positions from the firm.
On June 13, Celsius, a competitor cryptocurrency lending company, put a halt to customer withdrawals and blamed it on the state of the market. There were other claims that the company was having cash flow problems and was on the verge of going bankrupt.
Following SEC’s Gensler’s confirmation of BTC’s commodity classification, the public reacted.
The CEO of BlockFi, Zac Prince, announced on June 14 that the company would be letting go 20% of its workforce in order to maintain profitability. These circumstances have also led to a round of layoffs from blockchain and cryptocurrency startups. How much the SEC’s financial fines affected the choice is unknown.
On June 21, a week later, BlockFi received a lifeline from cryptocurrency exchange FTX, which led to BlockFi signing a revolving credit facility arrangement for $250 million to improve the platform and the company’s balance sheets.
Days later, there were rumours that FTX may be in negotiations to buy a stake in BlockFi. However, a BlockFi spokesperson on June 24 that the company “does not comment on market rumours” and is “still negotiating the terms of the deal,” and shareholders are reportedly not happy with the move as it would eliminate shareholder equity.
According to recent reports, Morgan Creek, an investment company run by Anthony Pompliano, is attempting to put together a different $250 million agreement to acquire the bulk of BlockFi.