In a recent article, the California Department of Financial Protection and Innovation (DFPI) said that it is aggressively examining firms selling crypto interest accounts to US investors.
The banking authority said that it is investigating crypto interest account providers, particularly those that block customers from withdrawing funds and moving funds between accounts.
According to DFPI, most of these crypto interest account providers may have not “adequately” warned consumers about the dangers they face when funding their accounts.
The regulator mentioned steps it had taken against crypto lending businesses BlockFi and Voyager Digital in its publication, claiming that certain crypto interest accounts were unregistered securities.
The purpose of securities registration is, in part, to ensure that investors receive all material information required to decide whether to enter into these crypto-interest account arrangements, such as the risks associated with deposited funds. According to DFPI, the Department is examining whether additional crypto-interest account providers are breaking laws within the Department’s authority.
The banking regulator also asked California residents who use crypto interest account providers whose platforms have blocked withdrawals and transfers to file complaints with the agency.
Because of the recent crypto market meltdown, certain crypto lending sites have suspended trading and withdrawals, making it harder for users to retrieve their assets. The drop in cryptocurrency values, along with crypto lenders’ decision to halt withdrawals, has compelled authorities to increase their scrutiny of the sector in order to protect investors.
Following the market crisis, finance ministers and central bankers from the Group of Seven (G-7) developed countries advocated for rapid and complete regulation of crypto assets in May. The Council’s president and the European Parliament reached an agreement last month on the Markets in Crypto-Assets (MiCA) legislation to safeguard investors and maintain financial stability.
The Bank of England (BoE) has recommended tougher crypto rules, citing market risks.