California regulator is investigating firms that offer crypto interest accounts

Quick Take

  • California’s DFPI says it is actively investigating multiple firms offering crypto interest accounts for possible securities violations. 
  • Though it did not name specific firms, it encouraged California customers using platforms that have paused withdrawals or transfers of crypto to contact the department.

The California Department of Financial Protection and Innovation says it is actively investigating multiple firms offering crypto interest accounts. 

In a consumer alert posted today, the regulator said it's looking at firms nationwide that offer interest-bearing crypto asset accounts, including some that are preventing customers from withdrawing from and transferring between their accounts. The Department says it's investigating whether providers are violating jurisdictional laws.

The notice encourages California customers of platforms that have slowed or paused withdrawals or transfers of crypto assets to contact the department. Though the notice doesn't name any firms as part of the investigation, crypto lender Celsius has yet to restart withdrawals and transactions on its platform since pausing the services last month during a liquidity crisis. Last Friday, reports indicated state regulators in Texas and Alabama were expanding investigations into Celsius and Voyager.  

In its notice, the regulator pointed to recent actions the DFPI took against crypto lenders BlockFi and Voyager Digital, saying these cases found that certain crypto-interest accounts constituted unregistered securities. The purpose of registration, according to the DFPI, is to make adequate disclosures to investors. Now, it's looking into whether other firms may be on the hook for the same violations.

"The Department warns California consumers and investors that many crypto-interest account providers may not have adequately disclosed risks customers face when they deposit crypto assets onto these platforms," said the notice. "Crypto-interest account providers are not governed by the same rules and protections as banks and credit unions, which are required to have deposit insurance."


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About Author

Aislinn Keely joined The Block in the summer of 2019. She is a member of the outlet's policy team, holding down the legal beat. Before The Block, she lent her voice to the NPR affiliate WFUV, where she reported and anchored newscasts in addition to some podcast work. Aislinn is a proud Fordham Ram and editor-in-chief emerita of its newspaper. When she isn't writing or reporting, Aislinn is running and rock climbing.