- California Department of Financial Protection and Innovation (DFPI), has directed MyConstant that certain products be discontinued.
- In July, the DFPI warned that it would clamp down on crypto-interest account providers.
- DFPI argues MyConstant provided and sold non-exempt unqualified securities.
In a press release on December 21, the California Department of Financial Protection and Innovation (DFPI) ordered crypto lending platform MyConstant to “desist and refrain” from offering a number of its crypto-related services in California. This follows a July warning by the department that it would be crackingdown on crypto interest account providers within the state.
The DFPI announced that it would be investigating MyConstant in the first announcement. December 5 via a press release It stated that MyConstant wasn’t licensed to operate in California.
MyConstant was directed to cease offering its peer-2-peer lending brokerage service and interest bearing crypto asset accounts. The DFPI states that the products are against the California Consumer Financial Protection Law (CA Securities Law) and California Securities Law.
According to the DFPI, MyConstant’s offering and selling of its peer-to-peer lending service known as “Loan Matching Service” contravenes California’s financial codes. The department said that the crypto lender engaged in “unlicensed loan brokering,” since the platform allowed lenders to lend without proper licenses.
DFPI’s problem with MyConstant interest-bearing products
Besides the P2P lending, the DFPI also has problems with MyConstant’s fixed interest-bearing crypto asset product. Customers can deposit fiat and crypto assets with the promise to receive a fixed annual percentage return.
The DFPI says that this product is an example of MyConstant offering and selling non-exempt, non-qualified securities.
MyConstant is facing difficult economic times
The DFPI’s action comes at a difficult time for the crypto lender. It announced that it couldn’t continue to do business as usual on November 17, due to rapidly deteriorating markets that had prompted heavy withdrawals.
The platform then limited its business activities including pausing withdrawals and announcing that “No deposit or investment request will be processed at this time.”
MyConstant has updated its users via its website since then on future plans, including the most recent (December 15th) update plans that include a financial overview and estimated recovery as well as a liquidation schedule.
The platform has however continued to offer crypto-backed loans, ensuring borrower compliance, processing loan repayments, returning borrowers’ collateral once they repay their loans in full, and liquidation of borrowers’ collateral if they default.