- California DFPI told crypto-lending platform MyConstant to “desist and refrain” its services to people
- DFPI claimed that the company’s Loan Matching Service” tampers with one of California’s financial laws.
- MyConstant has been warned since July 2022.
MyConstant, a cryptocurrency lending platform, has been ordered by the California Department of Financial Protection and Innovation (DFPI) to halt its cryptocurrency-related services due to suspected violations of state securities law.
On December 21, the DFPI announced that it had ordered MyConstant to “desist and refrain” from its brokering service, such as peer-to-peer loaning and asset accounts with interest, because they violate the California Securities and the California Consumer Financial Protection Law.
When MyConstant advertised and marketed its “Loan Matching Service,” a peer-to-peer lending option, the state authority claimed the company breached a financial regulation. The lawsuit also stated that MyConstant engaged in “unlicensed loan brokering” by convincing lenders to issue loans without the proper licensing.
Another worry for the regulators was the crypto lender’s inclusion of fixed interest rates in crypto services. This product is MyConstant’s selling point, where a consumer puts crypto assets, including altcoins, stablecoins, and fiat currency, into the platform and is guaranteed an annual interest rate. It may look alluring to pro-crypto customers, but according to the DFPI, it breaches financial securities.
MyConstant is an “Unlicensed” Company in California
MyConstant’s offerings and sales were cited as evidence of providing unqualified securities to the public. The regulatory agency said in July that it was monitoring a wide variety of crypto interest account providers for possible violation of legislation within the authority of the Department.
In the first week of December, the DFPI stated that MyConstant is “not licensed” to conduct business in California in its initial news announcement regarding the company.
Previously, a month before the announcement of MyConstant as an illegal crypto firm, it declared that it was “unable to continue to operate our business as usual” due to the constant bear market, which resulted in significant withdrawals from users. The DFPI saw this statement as a red flag in the financial sector.
There was also a notice saying, “No deposit or investment request will be processed at this time,” which may have caused panic among its customers due to halted withdrawals and slow activity – similar to the days counting down to the demise of FTX.
As of press time, MyConstant’s website has been regularly updated with new information for users. A revised strategy was among the materials distributed to customers on December 15. It outlined the current financial status, a timeline for liquidation, an anticipated recovery, and the necessary steps for its long-term goals.
The company assured users that it would maintain management of its cryptocurrency-supported loans. Borrower compliance, loan repayment, collateral return upon loan payoff, and collateral liquidation upon borrower default are all examples of such duties.
While MyConstant is calming its customers down after the California DFPI demanded it to stop its services, this collision between state authorities and crypto firms has been usual throughout 2022, including Circle and Celsius.