the first case of its kind may turn out to be a blessing in disguise
February has been an interesting month for the Indian crypto community. the government finally addressed the multi-trillion dollar industry by introducing a 30% tax on gains, lending a degree of credibility to such investments. however, it was quick to follow up with a statement that taxing crypto “doesn’t mean it’s legalised”. perhaps a little confusing, but dealing with a whole new paradigm of finance can be so.
that is why legal precedents from across the globe might turn out to be an important factor, and one such may just have been set by the US Securities and Exchanges Commission (SEC) in its $100 million settlement with crypto lending platform BlockFi.
what does the future hold for the category?
the SEC originally charged BlockFi in November, in the first such instance of its kind, for offering unregistered securities. in simple words, a security is a financial instrument, typically any asset that has some financial value and can be traded. any company offering such instruments in the US has to be registered and compliant with the terms set by the SEC.
BlockFi’s crypto lending product, which allows users to earn high interest rates by depositing their crypto assets with the platform, would appear to fall within that scope. but rather than awaiting a legal order to that effect, the platform chose to settle with the SEC by paying a $50 million fine to the regulator and a further $50 million to various state regulators. it will also cease the product offering to any new customers. however, the positive spin here if you seek one, is that existing customers who have signed up for the offering will be left untouched and BlockFi will work with the SEC to resume its offering within the scope set by the regulator.