California Regulator Issues Refrain Order to Crypto Platform MyConstant, Citing Violation of Financial Laws

• California’s regulator has issued a desist and refrain order to MyConstant to halt its services in the state.
• The regulator ruled that the peer-to-peer lending service and interest-bearing accounts violated the state’s laws. 
• Clients of MyConstant can report complaints online about peer-to-peer lending and interest-bearing accounts. 
• DFPI has also taken recent steps to revoke the licenses of BlockFi and Salt Lending.

The Department of Financial Protection and Innovation (DFPI) in California has issued a desist and refrain order to MyConstant, a provider of crypto-related services in the state. According to the regulator, the order targets the protocol for violating California securities and consumer financial protection laws.

The regulator specified that the protocol’s peer-to-peer lending service and interest-bearing accounts violate the state’s law. 

The brokered loans, according to DFPI, were secured by the borrower’s crypto assets. On the interest-bearing crypto asset account, the California regulator said MyConstant promised a fixed annual percentage interest rate yield between 6% to 9% depending on the repayment timescale. According to the filing, consumers taking out these loans had to put up collateral of 150% of the loan’s value in crypto assets.

DFPI invited MyConstant clients to report complaints about the protocol’s peer-to-peer lending and interest-bearing accounts on its website. 

"If you are a client of MyConstant with complaints about their peer-to-peer lending or interest-bearing accounts, file a complaint with the DFPI online (dfpi.ca.gov/file-a-complaint) or call toll-free at (866) 275-2677," the agency said.

The agency expects offerers of securities or other financial services in the state to run in line with California’s financial laws.

California Regulator Planning to Revoke Other Firms’ License

This move by the California regulator comes a few days after it announced ongoing plans to revoke the lending license of BlockFi. The DFPI accused the lender of failing to undertake adequate underwriting when making loans. 

It said the firm also failed to consider borrowers’ ability to repay these loans, a development that violates California’s financing laws and regulations. The agency asserted that BlockFi risks severe punishment if it fails to request a hearing before Dec. 30, 2022. 

Last November, DFPI suspended SALT Lending LLC’s California Financing Law license. The suspension manifested as part of its efforts toward investigating the collapse of FTX and its impact on SALT.

On the Flipside

• Crypto lending firm MyConstant is a recent victim of the FTX collapse. Following heavy withdrawals due to rapidly deteriorating market conditions, the firm appeared to have fallen on hard times a month ago.

Why You Should Care

Crypto lending firms are having a hard time in the state of California. For months, state regulators have warned consumers about crypto lending’s dangers. Six months ago, the DFPI advised consumers to look for crypto-interest accounts with “extreme caution.”

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