California Regulator Halts MyConstant Services Over Legal Violations

California's Regulatory Action Against MyConstant

California's Department of Financial Protection and Innovation (DFPI) has issued a desist and refrain order to MyConstant. The crypto-related service provider is accused of violating state securities and consumer financial protection laws. MyConstant's peer-to-peer lending service and interest-bearing accounts were found to be non-compliant with California's legal standards.

Details of Violations

The DFPI highlighted that MyConstant's brokered loans were secured by the borrower’s crypto assets. The platform offered a fixed annual interest rate of 6% to 9%, depending on repayment terms. Borrowers were required to provide crypto collateral amounting to 150% of the loan value. These practices led to the regulatory action, aiming to protect consumers from potential financial risks.

Consumer Action and Regulatory Expectations

The DFPI encourages MyConstant clients to report any complaints concerning the company's services. California's financial regulations require service providers to comply with state laws, ensuring consumer protection and market fairness.

Broader Regulatory Crackdown

This action is part of a broader regulatory effort, with the DFPI also moving to revoke the licenses of other firms like BlockFi and SALT Lending. These actions are a response to inadequate loan underwriting practices and financial compliance failures. BlockFi faces penalties if it does not address these issues by the stipulated deadline.

Impact on the Crypto Lending Sector

The regulatory scrutiny follows the collapse of FTX, which has affected firms like MyConstant. The DFPI has consistently warned consumers about the risks associated with crypto lending. It advises caution with crypto-interest accounts, reflecting the state's commitment to safeguarding consumer interests in volatile market conditions.