Due to potential breaches of state securities law, the California Department of Financial Protection and Innovation (DFPI) has ordered the cryptocurrency lending platform MyConstant to stop marketing many of its cryptocurrency-related products. This comes after the watchdog issued a warning in July stating that it would be cracking down on companies offering cryptocurrency interest accounts in the state.
The California Securities Law and the California Consumer Financial Protection Law, according to the DFPI, have been broken by MyConstant’s provision of interest-bearing crypto asset accounts and peer-to-peer loan brokering services. The DFPI ordered MyConstant to “desist and refrain” from providing these services.
DPFI’s allegations on MyConstant
The DFPI, which recently made headlines with restriction orders on various crypto entities, claimed that one of the state’s financial rules was broken by MyConstant’s providing and selling of its peer-to-peer loan business known as “Loan Matching Service.” It also claimed that MyConstant participated in “unlicensed loan brokering” by encouraging lenders to make loans without authorization.
The fixed interest-beating crypto asset products offered by the cryptocurrency lender, which required customers to deposit crypto assets (such as stablecoins and fiat) in exchange for a guaranteed fixed yearly percentage interest return, were also problematic in the eyes of the regulators.
It claimed that MyConstant issued and sold non-exempt, unqualified securities in these instances. The regulator announced in July that it was looking into several providers of cryptocurrency interest accounts to see if they were violating regulations under the Department’s authority.
In a press statement dated Dec. 5 that claimed MyConstant is “not licensed” by DFPI to conduct business in California, DFPI first revealed it was looking into MyConstant.
The company, located in California, looked to be in financial crisis only a month before the latest action, claiming on November 17 that “rapidly worsening market circumstances” had led to significant withdrawals and that it could not continue to conduct its business as usual.
The site also stated that no deposit or investment request would be accepted at that time. It also noted that it had curtailed its commercial activities and had paused withdrawals.
Since then, the platform has been updating customers on its website, including a revised plan that was provided to consumers on December 15 and contained a financial summary, a timeline for liquidation, an estimate of recovery, and future measures.
Amid the recent attacks on crypto entities by watchdogs, DFPI seems to be doing the most in cryptocurrency with one of its most renowned attacks on BlockFi crypto entities.