Alabama issues a show-cause notice to BlockFi in order to impose a ban on BIAs.

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The Alabama Securities Commission (ASC) has issued a show-cause notice to BlockFi with the intent of prohibiting cryptocurrency sales in the state. BlockFi, for its part, was quick to confirm receipt of the order and clarify its position on Twitter.

“We are aware of the show cause order issued by the Alabama Securities Commission. We have active dialogues with regulators worldwide, including those in Alabama, to share details about our products, which we believe are lawful and appropriate for crypto market participants.”

New Jersey-based BlockFi sells interest-earning cryptocurrency accounts known as BlockFi Interest Accounts [BIAs]. According to the ASC, the company raised a minimum of $14.7 billion through the sale of these BIAs, which could be considered “the sale of unregistered securities in violation of the Securities Law.”

As a result of the order, BlockFi was required to explain “why they should not be directed to cease and desist from selling unregistered securities in Alabama.” According to ASC Director Joseph Borg, several entities have already registered with the ASC, as required by law, to sell securities to residents of the state. He continued,

“Most of those registered to sell securities live outside of Alabama, but anyone offering securities must be registered before making an investment offer to an Alabama resident.”

The show-cause notice accused BlockFi of posing as a “U.S. regulated entity,” despite the fact that it had never been registered with the agency or any other securities regulator. Despite the notice, however, BlockFi remains firm on its position, stating that the BIAs are not a security.

“Our stance hasn’t changed – the BlockFI Interest Account is not a security.”

The timing is surprising, especially given that New Jersey regulators only recently ordered BlockFi to stop offering BIAs, while also giving the cryptocurrency platform an extra week until July 29 before doing so.

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The CEO of BlockFi, Zac Prince, informed the community that the ban’s effective date had been postponed by the New Jersey Bureau of Securities [NJ BOS].

He added,

“We remain firm in our belief that the BlockFi Interest Account is not a security.
We are fully operational for all of our existing clients in New Jersey and worldwide, who continue to have access to all products, services, and assets on the BlockFi platform.”

The impact of a lack of regulatory clarity becomes more apparent as the regulatory noose tightens around crypto-businesses. While many laughed when Ripple was hauled into court for selling “unregistered securities,” the impact on the remaining crypto-market had been predicted for some time.

Now that others are suffering, the Founder of Crypto Law, John E Deaton, has asked Anthony Pompliano, a Board member of BlockFi, to band together against the cause.

 

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The crypto-community in the United States may need to band together quickly to reach an agreement with regulators, or a long list of lawsuits against crypto-businesses may be unavoidable.

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