The company agreed to the license revocation and committed to discontinuing unsafe practices. DFPI reported that the company violated the California Financing Law (CFL). BlockFi gave loans without considering borrowers’ repayment capacity and charged interest before the loans were disbursed. Additionally, the company failed to provide credit counseling and did not meet credit reporting obligations.

DFPI Commissioner Clothilde Hewlett said, “While we encourage innovation in our financial markets, companies must comply with laws and protect consumers to continue operating.”

The bankrupt company will pay a $175,000 fine imposed by California, but the payment has been postponed to prioritize consumer repayments. In May 2024, the company shut down its web platform, and customers can no longer access it.

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The bankruptcy process began after Sam Bankman-Fried‘s FTX exchange collapsed. The company had significant exposure to FTX and its affiliates. BlockFi filed for bankruptcy due to a $400 million credit line with FTX US. Additionally, FTX was one of BlockFi‘s largest unsecured creditors.

By 2024, the company is estimated to owe up to $10 billion to more than 100,000 creditors.

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This new law gives full authority to the Financial Protection and Innovation Unit. (DFPI) on regulations while also granting it power to issue licenses to companies wanting to operate in the cryptocurrency sector. Also, DFPI will conduct an 18-month trial after implementing the law it has set.

California Governor Newsom Approves New Law

Governor Newsom of California says that this new cryptocurrency law will both increase confidence in the digital sector and reduce the rate of fraud. He also added that along with consumer and investor protection.

Another interesting piece of information is that last year when the law was being drafted, the DFPI team met with Coinbase executives. The two sides held a series of meetings on what the law should be like. Also, last year Governor Newsom rejected a cryptocurrency bill proposal because it had some shortcomings.

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