BlockFi's Nexo faces regulatory clampdown

Eight U.S. state regulators charged criptogroup for failing to register its Earn Interest Product, as authorities crackdown on digital asset platforms rocked by a winter of the digital asset.

The regulators from New York, California, Kentucky, Maryland, Oklahoma, South Carolina, Washington and Vermont all filed administrative actions against the company, saying its accounts would qualify as securities and should be registered as such.

In February, BlockFi agreed to pay $100 million in a landmark settlement with the U.S. SEC and state authorities, saying that Nexo's interest-bearing product should have been registered as a security, and that it violated the law and investors' trust by falsely claiming it is a licensed and registered platform.

Digital asset platforms have been looking for more clarity on the rules governing such products, saying current regulations aren't clear.

The company said that since the SEC guidance on earn products in February 2022, Nexo voluntarily stopped the onboarding of new U.S. clients for our Earn Interest Product and stopped the product for new balances for existing clients.

According to California's Department of Financial Protection and Innovation, Nexo's interest accounts promise an annual interest rate as high as 36 per cent.

The interest is only applicable for one asset, and it does not advertise the high rate, according to the company. For the majority of assets on the platform, the rates offered are in single-digit percentages, Nexo said.

The regulatory clampdown came after a risk-off sentiment and the fear of a looming recession crushed risky assets, forcing some companies to go bankrupt this year.