Starting tomorrow the cryptocurrency exchange BlockFi must stop offering interest on New Jersey based Bitcoin accounts that the owner has permitted BlockFi to lend out.
It’s a lot like allowing your securities broker to use the securities in your account to lend to shortsellers.
The New Jersey Bureau of Securities issued a cease and desist order stating that BlockFi’s accounts were not registered with that office or exempt from registration, and their sale violated New Jersey securities laws.
But, I wonder if the State got it wrong.
When an entity takes “deposits” and uses them to lend, that quacks like a bank.
BlockFi’s website is also now offering VISA credit cards.
The company looks more like Bank of America than Merrill Lynch.
However, since Bitcoin is not recognized as legal tender, perhaps the banking regulators can’t get involved.
Perhaps a big legal gap that may permit BlockFi to continue to operate if it challenges the Bureau’s action in court.
(No endorsement implied).
Crowd Funding News 