Kentucky Department of Financial Institutions has ordered BlockFi to stop accepting new sign-ups for its new interest accounts.
This makes Kentucky the fifth state to have ordered the company to comply with a similar measure in the past few weeks.
Kentucky follows others such as New Jersey, Alabama, Vermont and most recently Texas which all took issue with BlockFi Interest Accounts or BIAs, arguing that such accounts violated state securities laws.
In a statement, the regulator had said: “BlockFi's website offers cryptocurrency lending and borrowing services through ‘BlockFi Interest Accounts' (BIAs) advertised on its website. Through these accounts, investors may deposit certain cryptocurrencies with the company in exchange for a specified interest rate.”
BlockFi agreed to immediately discontinue new sign-ups in Kentucky. The company has been coming under regulatory fire because it had been pooling customers' funds together and then lending those funds to turn a profit.
However, BlockFi is not convinced that its actions have violated any state securities laws and while compliant with orders to shut down BIAs, it's still denying wrongdoing.
BlockFi is currently looking to launch and secure a $500m Series E Funding round, which could precede a Initial Public Offering,
Whether this happens may depend on how much leniency regulators take on the company and whether BlockFi overcomes the challenges it faces in a growing number of states.