Due to potential violations of state securities law, the California Department of Financial Protection and Innovation (DFPI) has ordered the cryptocurrency lending platform MyConstant to stop marketing several of its cryptocurrency-related products.
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.
The DPFI 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.”
Additionally, it claimed that MyConstant engaged in “unlicensed loan brokering” by encouraging lenders to make loans without the necessary authorizations.
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 annual percentage interest return, were also problematic in the eyes of the regulators.
It claimed that in these instances, MyConstant issued and sold non-exempt, unqualified securities.
The regulator announced in July that it was looking into a number of providers of cryptocurrency interest accounts to see if they were “violating regulations under the Department’s jurisdiction.”
In a press release 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, which is situated in California, appeared to be in financial trouble just a month prior to the recent action, claiming on November 17 that “rapidly deteriorating market circumstances” had led to significant withdrawals and that it was “unable to continue to conduct our business as usual.”
At the moment, the site also stated: “No deposit or investment request will be accepted at this time.” It also stated that it had limited its commercial activity 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 contains a financial overview, a schedule for liquidation, an estimate of recovery, and next measures.
The platform stated at the time that it would keep managing its crypto-backed loans, including monitoring borrower compliance, handling loan repayments, releasing collateral to borrowers after loans were fully repaid, and liquidating collateral in the event of failure.
