Cryptocurrency lending firm BlockFi Lending LLC has agreed to pay $100 million in penalties and pursue registration of its crypto lending product as part of a settlement with the U.S. Securities and Exchange Commission.

The payment came about after the SEC charged BlockFi with failing to register the offers and sales of its retail crypto lending product. The SEC also charged BlockFi with violating the registration provisions of the Investment Company Act of 1940.

Under the deal announced today, BlockFi agreed to pay $50 million and cease its unregistered offers and sales of BlockFi Interest Accounts, as well as attempt to bring its business within the provisions of the Investment Company Act within 60 days. BlockFi’s will also register under the Securities Act of 1933. In addition, the company will pay out an additional $50 million in fines to 32 states to settle similar charges.

Founded in 2017,  BlockFi is a nonbank lender offering cryptocurrency-backed loans, allowing investors to borrow against their cryptocurrency holdings as equity. The loans enable applicants to unlock up to 50% of the value of their assets in U.S. dollars and can be used for any purpose, from paying off credit card debt to buying a home. The money lent by BlockFi comes from investors who deposit their cryptocurrency holdings in an interest-bearing account that promises returns of up to 8.6% annually.

The SEC’s issue with the company is that Bitfinex should have registered the interest-bearing accounts.

“This is the first case of its kind with respect to crypto lending platforms,” SEC Chair Gary Gensler said in a statement. “Today’s settlement makes clear that crypto markets must comply with time-tested securities laws, such as the Securities Act of 1933 and the Investment Company Act of 1940.”

BlockFi took the settlement well, with a letter from the company’s founders stating that this was the “increased regulatory clarity we’ve been hoping for” and that “with today’s resolution, we are leading the creation of a new regulatory landscape for crypto and our clients.”

The letter added that the company intends to file or confidentially submit a registration statement to the SEC for BlockFi Yield, a new crypto interest-bearing security.

BlockFi clients outside the U.S. are unaffected by the changes and will continue to have full access to the platform. Customers in the U.S. will receive an email and in-product communications with further details on changes to their client experience.

Image: BlockFi