California’s Financial Regulator Probes Firms Offering Crypto Interest Accounts

The California Department of Financial Protection and Innovation (DFPI) said in a recent publication that it is “actively investigating” companies offering crypto interest accounts to investors in the United States.

DFPI Investigates Crypto Interest Account Providers

The financial regulator said it is looking into crypto interest account providers, especially those that are preventing users from withdrawing from and transferring between their accounts.

DFPI stated that most of these crypto interest account providers may not have “adequately” informed users about the risks they face when they fund their accounts.

In its publication, the regulator cited actions it had taken against crypto lending firms, BlockFi and Voyager Digital, saying it discovered that some crypto interest accounts were unregistered securities.

“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,” DFPI said.

The financial regulator further urged Californian investors using crypto interest account providers that have suspended withdrawals and transfers on their platforms to submit complaints to the department.

Regulators Intensify Focus on Crypto

The recent crash in the crypto market caused some crypto lending platforms to suspend trading and withdrawals, making it difficult for customers to access their funds. The collapse of crypto prices and the decision of crypto lenders to pause withdrawals have forced regulators to intensify their focus on the industry in an effort to safeguard investors.

In May, finance ministers and central bankers from the Group of Seven (G-7) industrialized nations called for a swift and comprehensive regulation of crypto assets following the market crisis. Last month, the Council’s presidency and the European Parliament agreed on the Markets in Crypto-Assets (MiCA) regulation to protect investors and preserve financial stability.

The Bank of England (BoE) recently called for stricter regulations on crypto, citing “vulnerabilities” in the market.