BlockFi No Longer Lending in California, DFPI Moves to Suspend License

By temporary On Nov 13, 2022 51

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November 13, 2022 by Mishal Ali

Following the FTX crisis, California’s Department of Financial Protection and Innovation (DFPI) suspended cryptocurrency lender BlockFi’s license for 30 days, pending an investigation into the company’s recent decision to limit its business operations.

After Terra Luna’s disaster, the demise of FTX and the uncertainty it caused were seen as another damaging blow. The extent of the damage will depend on what details emerge over the next few days.

The day before BlockFi’s suspension order, DFPI announced that it “is investigating the apparent failure of crypto asset platform FTX.”

Regulators for California stated in the statement that the DFPI takes this supervision duty extremely seriously and that the department anticipates all organizations providing financial services in the state to abide by local financial laws.

However, after a week of turbulence, FTX, FTX US, and Alameda filed for bankruptcy, and its CEO Sam Bankman-Fried resigned on Friday. It implies that FTX intends to restructure and emerge when the bankruptcy process is complete. The CEO also said:

Hopefully things can find a way to recover. Hopefully this can bring some amount of transparency, trust, and governance to them.

BlockFi Lender License Suspension

According to the press statement from the DFPI, BlockFi announced on November 10, 2022, through its Twitter account that it could not do business as usual due to the uncertainty surrounding the status of FTX.

The company released a statement in which it claims that the “lack of clarity” regarding FTX’s present situation, which had previously been advertised as a $250 million investment in the platform to strengthen its financial sheet, was the reason for this decision.

The DFPI said it is looking into whether BlockFi abides by all applicable regulations, including the California Financing Law, that fall within the Commissioner’s jurisdiction.

However, BlockFi notifies the DFPI that “it has ceased offering loans in California and asks clients not to deposit to its Wallet or its interest accounts.” The Commissioner told BlockFi to stop promoting or selling unqualified, non-exempt securities in the form of an interest account by February 2022, as per the press statement.