“Today’s regulations make it clear that crypto markets must comply with proven securities laws, such as the Securities Act of 1933 and the Investment Companies Act of 1940,” Gensler said in a statement. “It further demonstrates the Commission’s willingness to work with crypto platforms to determine how they can comply with these laws.”

The agreement resolves charges by the SEC and 32 states alleging that the Jersey City, New Jersey-based company failed to register its BlockFi interest account loan product as collateral and has misrepresented the risks of the product. In settling the case, BlockFi did not admit the regulators’ claims. It will stop sales of the product in the United States and introduce a new one that complies with securities laws.

According to Peirce, the SEC’s only Republican commissioner and a longtime crypto proponent, the deal can hardly seem attractive to crypto lenders as a new regulatory model. She voted against the settlement and published a declaration in dissent.

“We’re taking an unconstructive approach to determining how we can review these new products and achieve investor protection goals, without preventing people from participating in the products and services that interest them,” Peirce said in an interview. .

“The SEC has been reluctant to try to adapt new technology in a way that meets its mandate to protect investors, but also keeps things moving forward,” she said. “It’s been an ongoing issue at the SEC and it’s likely to be an issue for crypto lending as well.”

BlockFi said Monday it would seek regulatory approvals for its retail lending product. But the SEC has carved out a difficult legal path for the company, Peirce said. BlockFi may have to register as an investment firm, an arduous route for a company issuing a debt security. If it doesn’t try to register, BlockFi would need to get an exemption or debarment from the SEC, but that could also prove quite difficult, given the SEC’s “enhanced scrutiny of crypto companies,” a said Peirce in his dissent.

When asked if the BlockFi deal would have a chilling effect on crypto lending, Peirce said “we’ll see how people react.” The SEC has raised questions about investor protection, she said. “Let’s work constructively on the sequel. That’s what I would like to see us do.

Crypto lending has taken off, with companies like BlockFi racking up billions of dollars in deposits and loans. Other major players in the industry include Celsius Network, Abra, and Genesis. The latter is an institutional lender.

Crypto lenders have also faced state regulatory action, including cease-and-desist orders in New Jersey and Kentucky.

BlockFi CEO Zac Prince said

Twitter

that “we reached a resolution with the SEC and state regulators that identifies a clear path for people to earn interest on their crypto.” Existing customers will continue to earn interest and the company’s other products, including its digital wallet, credit card and institutional offerings, are unaffected, he added.

Settlement, BlockFi noted, provides the “increased regulatory clarity we hoped for”. But BlockFi will now have to meet SEC requirements to continue offering its products to retail investors. At least one official, Commissioner Peirce, doesn’t seem to view this as an easy win for the company.