DeFi Pays $100M Fine - InvestingChannel

DeFi Pays $100M Fine

Proprietary Data Insights

Retail Top Crypto Searches This Month


Biden Pulls a Punch

Joe Biden and Janet Yellen disagree.

President Biden was ready to roll out his cryptocurrency policy.

Treasury Secretary Yellen persuaded him to put it on hold.

The order aimed to set a strategy across the government for digital assets.

Yellen doesn’t want the plan out there, especially any mention of a central bank-issued digital dollar.

She and her team want more room and time to work and develop plans.

Yellen pointed to outcomes like the one highlighted in our main story below as progress.

We agree with Biden.

The executive order wasn’t anything binding other than to force agencies to prioritize working on the issue and report out in the second half of 2022.

At a time when you have legislators crafting one-off legislation and a scattershot approach by regulators, it seems selfish to not allow the White House to deliver a framework strategy.

We need this. Crypto companies want this. Biden needs to give direction.

We cannot continue down this free for all path that is making billionaires and money launderers all in the same breath.


DeFi Pays $100M Fine

Key Takeaways

  • BlockFi settled a lawsuit with the SEC for $100 million.
  • The suit clarifies rules, signaling to DeFi companies they will need to register under the Securities Act of 1933.
  • Investors want accountability and transparency for the industry which is largely operating as a ‘Wild West’ model.

Bitcoin is down 40% from its highs in 2021. 

Yet, the big story happened behind the scenes this week.

SEC Lays the SmackDown

Valentine’s Day didn’t deliver roses or chocolates to BlockFi, the popular FinTech company.

Instead, the SEC gave it a ‘love you’ letter in the form of dropped charges against the company. It just cost BlockFi $100 million.

Backstory – In late 2021, the SEC charged that BlockFi should have registered with regulators since it offered and sold lending products.

Decentralized Finance (DeFi) companies complained the SEC and government entities hadn’t issued rules or clarity to help guide the companies.

In 2020, the SEC issued $4.7 billion in fines, dropping 20% in 2021 to $3.9 billion.

No joke, in the world of US Finance, it’s commonly said that paying SEC fines is the “cost of doing business.”

That’s a pretty cynical view.

The good news is that the settlement gives clarity to DeFi companies including:

  • Choosing between serving U.S. or international clients.
  • Register their product as a security under the Securities Act of 1933.

The second point is a key element to driving transparency and accountability in the industry.

Investors Want Security

Between a Bitcoin hack on IRAs for millions to a massive DeFi hack that stole $321 million from the Wormhole token bridge, it begs the question…

How secure are cryptocurrencies?

Proponents point to blockchain technology as a secure way to transact.

Yet, we keep seeing hacks and fraud each year that gets into the millions if not billions.

And it’s a big reason why DeFi companies want to know the rules of the road and help build the framework to keep good players accountable and bad ones out.

The Bottom Line: Right now, we are regulating through litigation. That’s one way to do things. However, it doesn’t solve an issue until it becomes a serious problem.

We expect crypto and DeFi platforms to look to the U.S. for a regulatory framework given the size of the market.

Yet, it will be years before everything is settled. 

If you’re playing in the DeFi market, or looking at using its products, consider it a speculative investment. Don’t put anything in you aren’t comfortable parting with. There is still far too much risk and security issues left unresolved.

Want to get content like this directly to your inbox? Then we urge you to sign up for our newsletter here