The California Department of Financial Protection and Innovation (DFPI) has ordered cryptocurrency lending platform MyConstant to stop offering a number of its crypto-related products due to alleged government securities law violations.
DFPI said in a press release on December 21 that it had ordered MyConstant to “cease and desist” from offering the brokerage service for peer-to-peer loans and interest-bearing crypto-asset accounts, which it says violate California law. California Securities and Consumer Financial Protection Act.
DPFI alleged that MyConstant’s offering and sale of a peer-to-peer lending service it calls the Loan Matching Service violated one of the state’s financial codes.
It also alleged that MyConstant engaged in “unlicensed loan brokering”, whereby the platform solicited lenders to lend without proper licenses.
Regulators have also had issues with cryptocurrency lenders’ fixed-interest crypto-asset products, whereby a customer deposits crypto assets (such as stablecoins and fiat currencies) and is promised a fixed annual interest rate.
She said these were examples where MyConstant offered and sold non-eligible, non-exempt securities.
In July, the regulator said it was investigating several cryptocurrency account providers to determine whether they were “violating laws under the Ministry’s jurisdiction.”
DFPI first announced that it was investigating MyConstant in a press release on December 5, stating that MyConstant was “not authorized” by DFPI to operate in California.
Related: California Regulator Investigates Cryptocurrency Interest Accounts
The latest action comes just a month after the California-based company fell on hard times, announcing on November 17 that “rapidly deteriorating market conditions” prompted massive recalls and that it was “unable to continue to conduct our business as usual.”
The platform added at the time that it had limited its trading activity, including pausing withdrawals, and that “no deposit or investment request will be processed at this time.”
The platform has provided users with updates on its website since then, including an updated plan sent to users on December 15 that includes a financial overview, liquidation schedule, estimated recovery, and next steps.
At the time, the platform said it would continue to manage its crypto-enabled loans, including ensuring borrower compliance, processing loan repayments, returning borrowers’ collateral (when their loans are paid in full), and liquidating borrowers’ collateral if this occurs. hypothetical.