Bitcoin has all but erased its 2021 gains after falling below $30,000 yet again on Monday. The largest cryptocurrency by market volume experienced a massive drop amid calls for a tighter crackdown on cryptos and stablecoins. The EU has just announced plans to make crypto transfers traceable, and in the USA, the government has been cracking down on high-yielding crypto accounts.
In a completely surprising move, the New Jersey Bureau of Securities just issued a cease-and-desist order against BlockFi, one of the most popular crypto trading platforms. As of Thursday, the platform is not able to take in new NJ residents and has stopped offering interest-bearing accounts.
The government has cited unregistered securities “in violation of the Securities Law”. Governor Andrew Bruck said that no one gets a free pass just because they’re operating in the crypto market.
It has led to yet another significant price drop, although Bitcoin has recovered to $30K in just one night.
Regulatory Framework Causes a Lot of Trouble
The kind of regulator framework and crackdowns like the latest BlockFi developments are hurting Bitcoin and the cryptocurrency market. In the past few months, government from around the world have not been shy about crypto regulation. On one hand, countries such as El Salvador openly accept it, and on the other hand, the EU and USA are pushing hard for regulation.
The good news is that none of the proposals have materialized so far. It could be years before new regulatory proposals become law, but the intention is there. The blocking of BlockFi is a major shakedown, so it’s no wonder that the Bitcoin price has suffered as a result.
BlockFi’s CEO Zach Prince took to Twitter to explain that all of the platform’s users are lawful and appropriate for the crypto market. At the moment, the platform is fully operation for existing NJ customers. Prince also said that the platform is working hard with the authorities to protect the interest of its clients.
High-Yielding Accounts in the Crosshairs
The cease-and-desist order on BlockFi has targeted high-yielding crypto accounts. Investors on the platform can buy Bitcoin with ease and keep it in a separate BlockFi account. In that account, it can earn interest that can be paid monthly in crypto. The numbers are well above the interest banks offer. All the funds are pooled by BlockFi and then used for funding its lending operations and proprietary trading.
That’s what hit the nerve of banks and the US government – the interest rates. BlockFi pays up to 4% on up to 0.25% of 1 Bitcoin. At current prices, the interest is around $8,000. Other tokens have even higher yields, with USDT at 7.5%.
Those who have entered the lucrative market so far will continue earning, but new NJ traders are left in the dust. Bitcoin’s price is sliding down, and regulatory frameworks and moves such as this one are not helping it at all.
It remains to be seen if the predictions of experts of an upcoming bull run by the end of the year materialize. As things stand now, the market is in a tough position.