BlockFi Faces SEC Scrutiny Over High-Yield Crypto Accounts

An anonymous reader quotes a report from Bloomberg: BlockFi is being scrutinized by the U.S. Securities and Exchange Commission over its popular product that pays customers high interest rates for lending out their digital tokens, a development that significantly ratchets up the fast-growing crypto firm's legal woes. The SEC review focuses on whether the BlockFi accounts are akin to securities that should be registered with the regulator, according to a person with knowledge of the matter. The Jersey City, New Jersey-based firm touts annual yields as high as 9.5% on its website -- a figure that dwarfs the 0.06% average interest rate for bank savings accounts. States including New Jersey and Texas have already taken action against BlockFi, questioning whether it's marketing illicit financial products that lack bedrock consumer protections. BlockFi and other firms are able to pay high interest rates because they can charge institutional investors that want access to coins even more. The market is one of the hottest corners of crypto, with companies saying they've collected more than $40 billion in deposits. [...] A key concern is that unlike bank deposits, the crypto accounts aren't insured by the federal government. If a firm goes bust, customers could lose their funds.

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