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- Blockfi, a cryptocurrency lending company, had been charged with failing to register its crypto lending product. To settle the claims with the SEC and 32 state authorities, Blockfi has agreed to pay $100 million in fines.
- The SEC explained that crypto assets maintained in an interest-bearing account can be used to invest in a variety of crypto products or activities, such as lending programmes in which crypto assets are lent to borrowers, and that the interest being paid to you is based on these investing activities.
- The agency then listed the hazards associated with these activities, including market volatility and liquidity, the possibility that the entity holding your crypto assets would go bankrupt, regulatory changes, potential fraud, technological problems, security breaches, and viruses.
The Office of Investor Education and Advocacy of the Securities and Exchange Commission and the Division of Enforcement’s Retail Strategy Task Force jointly released an investor bulletin on Monday to inform investors about dangers with accounts that pay interest on crypto-asset deposits.
Blockfi Has Agreed To Pay $100 Million In Fines
On the same day, the Securities and Exchange Commission reported that Blockfi, a cryptocurrency lending company, had been charged with failing to register its crypto lending product. To settle the claims with the SEC and 32 state authorities, Blockfi has agreed to pay $100 million in fines. An interest-bearing account for crypto asset holdings is not as safe as bank or credit union deposits, the SEC noted.
Banks and credit unions are monitored by both federal and state banking regulators, according to the securities watchdog. In addition, the Federal Deposit Insurance Corporation (FDIC) and the National Credit Union Administration cover deposits at banks and federal credit unions (NCUA). Similarly, the Securities Investor Protection Corporation may protect securities accounts held with U.S.-registered brokers (SIPC).
The SEC issued a warning: Organizations that provide interest-bearing accounts for crypto assets do not offer the same level of security to investors as banks or credit unions, and crypto assets sent to those companies are now uninsured.
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The Hazards Associated With These Activities
The SEC explained that crypto assets maintained in an interest-bearing account can be used to invest in a variety of crypto products or activities, such as lending programmes in which crypto assets are lent to borrowers, and that the interest being paid to you is based on these investing activities. The agency then listed the hazards associated with these activities, including market volatility and liquidity, the possibility that the entity holding your crypto assets would go bankrupt, regulatory changes, potential fraud, technological problems, security breaches, and viruses.
Nancy J. Allen is a crypto enthusiast, with a major in macroeconomics and minor in business statistics. She believes that cryptocurrencies inspire people to be their own banks, and step aside from traditional monetary exchange systems. She is also intrigued by blockchain technology and its functioning. She frequently researches, and posts content on the top altcoins, their theoretical working principles and technical price predictions.
