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Home » Crypto News » Californian Authorities to Investigate Platforms Offering Interest on Crypto Assets

Californian Authorities to Investigate Platforms Offering Interest on Crypto Assets

Author: Jordan Lyanchev

Last Updated Jul 13, 2022 @ 14:47

The Californian Department of Financial Protection and Innovation has gone after several cryptocurrency lenders following the recent fiasco.

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The last couple of months have been quite a rollercoaster for DeFi and CeFi aficionados. Between events like the continuing Celsius Network saga or the can of worms opened by Three Arrows Capital finding itself in hot water, it’s not at all surprising that similar platforms would come under regulatory scrutiny.

However, the approach taken by the Californian Department of Financial Protection and Innovation (DFPI) differs as it asks exposed consumers to submit tips to help them build future cases against platforms halting or slowing customer withdrawals. A formal complaint can then be filed with the agency’s assistance.

Crypto Assets Viewed as Possible Unregistered Securities

In a statement released on the 12th of July, the DFPI stated that following recent inquiries into the behavior of BlockFi and Voyager Digital – who were issued cease and desist orders – as the two platforms were found to be dealing with unregistered securities. As a result, the DFPI believes customers were not adequately informed of the risks taken when depositing money on the platform.

Additionally, banks and other institutions dealing with securities are required by law to have deposit insurance – legislation that the DFPI believes the two named platforms breached.

“The purpose of securities registration, in part, is to ensure that investors receive all material information needed to evaluate whether to enter into these crypto-interest account arrangements, such as risks being taken with deposited funds. The Department is investigating whether other crypto-interest account providers are violating laws under the Department’s jurisdiction.”

Although Celsius Network was not mentioned in the statement, the agency made a follow-up post on Twitter – which also mentioned $wLuna – directing consumers affected by the Celsius fiasco to submit a complaint with them.

IMPORTANT: The Department of Financial Protection and Innovation is aware that @CelsiusNetwork, which offers crypto-interest accounts and other products, is preventing customers from withdrawing funds from its platform. (1/3)$wLUNA #Crypto #consumerprotection pic.twitter.com/pOAvXpbfnL

— Ca Department of Financial Protection & Innovation (@CaliforniaDFPI) July 12, 2022

Investigation Still Underway

For now, the DFPI has refrained from committing to a firm position on whether crypto-assets should be legally considered securities or not. They have, however, requested consumers affected by withdrawal freezes to contact them via e-mail or a toll-free number.

Clients are also advised to include their transaction history, records of communication with the staff of the platform, information on the token and blockchain involved, as well as any other relevant screenshots.

As the current bear market continues to drag on, more regulatory bodies can be expected to make similar statements, attempting to shield consumers from platforms that may have given insufficient attention to measures designed to protect users and platforms alike from unforeseen market forces. In the meantime, it’s important to remember the first rule of investing: Do Your Own Research.

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About The Author

Jordan Lyanchev
More posts by this author

Jordan got into crypto in 2016 by trading and investing. He began writing about blockchain technology in 2017 and now serves as CryptoPotato's Assistant Editor-in-Chief. He has managed numerous crypto-related projects and is passionate about all things blockchain. Contact Jordan: LinkedIn

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