Dunno bout you, but I wouldn't be too thrilled if I were BlockFi, facing $100M I have to pay the disgustingly bloated and crooked SEC of the USA in 2 installments, because our lending program may or may not have broken 1940s securities rules.
If this were about protecting the consumer from high risk lending/staking/pools, they could just as easily cite something BlockFi or any others have done and demand they make good or shut down, or they can say "here's a $100 ticket pay the fee", let them register and clear them ready to go. But, like everything that I harp on about, they want the extortion money, and they want to own the topic. This is not about protecting you or me. This is about funding the next case, and the next one after that.
Even Hester Peirce is concerned about Diktator Gensler's approach to try to lash out at anything that exists on planet earth that could be considered a security, yet has not registered with the SEC to operate as one, and more than this, his desire to race very quickly towards new regulatory rules that sweep entire new technologies into the jurisdiction of the SEC without regard for how those things should even be classified, and importantly whether those are things to be left to Congress (which is exactly what Congress has been discussing this year) or to be handled state by state with the money transmitter laws already in place.
When you layer these things together, you have the intentional fear-mongering of wondering, at a state level, whether your digital assets, which are already regulated by the way, will be affected by the Fed believing they over-rule state law that protects that asset. It is not good news.
So, this is yet one more example of the kind of over-reach that causes market manipulation. Did BlockFi do anything wrong? Did they disclose the risk? I know for a fact a lot of people are exceedingly naive about the risk in DeFi lending and staking. There is risk. The more unknown the market conditions for a coin, the potential for something bad to happen to a project, the more potential there is that you are lending an asset that could be worthless, get hacked, or simply lose value faster than any interest earned. For stablecoins, lending is less worrisome regarding value, but every time the SEC injects itself into the picture, it is likely to either force all platforms to ban US customers, which we already deal with daily, or to scare people away from lending programs.
The exchanges even like COINBASE want these lending programs, because they can make a gazillion dollars off of them, but Coinbase is trying to dance with the SEC and other agencies while writing up legislation recommendations they think would work. This is largely because Gensler has made it clear that half of the assets or more, on Coinbase are unregistered securities, and when Coinbase announced they were going to begin a lending program, the SEC slapped them with papers, and Coinbase cancelled the program that same day.
So, BlockFi says that nobody's accounts are affected, and it seems as if accounts already in the lending program will remain while new accounts won't be happnin'. This will be interesting to watch as it plays out.
But, the bigger picture is the one that always matters. Everything in crypto affects everything else in crypto. Some people will say "see? that's why we need decentralized pools" and the sort. But, they don't fully understand that are designed by companies, and those companies will be pressured into digital ID rules that are coming, that will be even more constrained than current KYC/AML. The governments of the world are setting their traps and it is up to the citizens to rise up and let them know we are serious about freedom. Not likely to happen, and especially will only take place if people understand there is even a problem to begin with.
SEC? not a fan. BlockFi? I don't really care, but for the sake of crypto, I certainly do. I believe in someone going full-on against real bad actors. This is a money grab and power grab and it's going to make the SEC even more of an incredibly powerful agency, well-funded and dangerous as it expands.
And on that note, annoyed Crypto Gordon Freeman, for now... out.
