The Department of Financial Protection and Innovation (DFPI) of California has initiated an investigation against crypto companies providing interest-bearing accounts. A crypto interest account is generally crypto platform’s offering that lets you lend cryptocurrency in exchange for earning interest.
The regulator stated in an announcement on Tuesday, “The Department is investigating whether other crypto-interest account providers are transgressing laws under the Department’s jurisdiction.”
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The regulator also warned consumers to “exercise extreme caution” when dealing with interest-bearing crypto-asset accounts as certain crypto interest account providers are providing unregistered securities, such as Voyager and BlockFi.
Not The First Investigation On Crypto Lenders
In recent months, the vulnerabilities of crypto lending platforms were surfaced. The state regulator of Vermont initiated an investigation against crypto lender Celsius.
Celsius is known for providing one of the lowest interest rates. However, it suspended all withdrawals between accounts on June 12 and recruited restructuring specialists. Celsius said that the extreme market conditions were responsible for their decision to pause withdrawals.
BlockFi, which is another popular crypto platform, failed to register the offers and sales of its retail crypto lending product. The Securities and Exchange Commission imposed charges on the company and to settle the SEC’s charges, BlockFi agreed to pay a 50 million dollar penalty, terminate its unregistered offers and sales of the lending product.
In addition to this, the company also paid an additional 50 million dollars in fines to 32 states to settle similar charges.
On July 13, 2022, the US regulator initiated an investigation against Voyager Digital Ltd. Quite recently, the crypto lending platform filed for bankruptcy along with claims to have millions of worth of crypto assets tied down to the exchange.
The regulator probed bankrupt crypto lender Voyager over claims of FDIC insurance. According to Fortune, many Voyager users reported that they faced difficulties due to this recent bankruptcy filing and have lost millions of dollars worth of their savings. Right after this information, the regulators expanded their investigation.
Singapore-based crypto lender Vauld paused all withdrawals, trading and deposits on its platform. According to the firm, customers have withdrawn more than $197.7 million from the platform since June, which caused the firm some trouble.
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The management informed that they were facing financial challenges despite their best efforts. Vauld has become another victim of a liquidity crisis developed by the crypto crash this year. The company is now considering restructuring.
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