Shalini Nagarajan

<div id="highlights-block_62bc5b424d476" class="highlights">
 <ul>
 <li>In February, the company was hit with one of the largest fines on record imposed on a crypto firm</li>
 <li>Crypto exchange FTX offered BlockFi a $250 million credit deal to ease its liquidity woes</li>
 </ul>
 
</div>



BlockFi has secured a payments license in Iowa, two weeks after the troubled cryptocurrency lender was fined in the state for selling unregistered securities.



The firm’s approval in the Midwestern state comes as liquidity issues continue to crop up across the industry, with crypto lender Celsius being the <a href="https://cms.blockworks.co/celsius-clashes-with-lawyers-over-chapter-11-bankruptcy-report/" target="_blank" rel="noreferrer noopener">first domino</a> to fall. BlockFi earlier this month announced it had liquidated a “large client” that failed to meet obligations.



The firm made the payments license announcement in a <a href="https://twitter.com/BlockFi/status/1541787388778844160?ref_src=twsrc%5Etfw%7Ctwcamp%5Etweetembed%7Ctwterm%5E1541787388778844160%7Ctwgr%5E%7Ctwcon%5Es1_&amp;ref_url=https%3A%2F%2Fcointelegraph.com%2Fnews%2Fsurprise-twist-as-blockfi-receives-money-services-license-in-iowa" target="_blank" rel="noreferrer noopener">tweet</a> on Tuesday. Iowa’s Money Service License allows BlockFi to offer stablecoin trading services and instant fund transfers to customers in the state.



<figure class="wp-block-embed is-type-rich is-provider-twitter wp-block-embed-twitter"><div class="wp-block-embed__wrapper">
<blockquote class="twitter-tweet" data-width="550" data-dnt="true">We&#39;re excited to announce that we’ve received our Money Services License in Iowa. Iowa residents can now trade stablecoins on our platform and instantly transfer funds via ACH. <a href="https://t.co/sNEFIlCeWY">pic.twitter.com/sNEFIlCeWY</a>&mdash; BlockFi (@BlockFi) <a href="https://twitter.com/BlockFi/status/1541787388778844160?ref_src=twsrc%5Etfw">June 28, 2022</a></blockquote><script async src="https://platform.twitter.com/widgets.js" charset="utf-8"></script>
</div></figure>



According to its <a href="https://blockfi.com/interest-account-terms-existing-us/" target="_blank" rel="noreferrer noopener">website</a>, the company’s interest-bearing crypto accounts have not been registered and may not be offered or sold in the US. BlockFi didn’t mention in its tweet whether Iowa’s license covers its yield-generating product.



BlockFi didn’t return Blockworks’ request to elaborate on its license.



Iowa’s securities regulator on June 14 <a href="https://iid.iowa.gov/press-releases/blockfi-ordered-to-pay-more-than-943000-in-iowa-for-failing-to-register-securities" target="_blank" rel="noreferrer noopener">ordered</a> BlockFi to pay a fine of around $943,000 for allegedly selling securities (its crypto interest accounts) without being registered as a broker-dealer.



That penalty was part of a broader <a href="https://cms.blockworks.co/crypto-lender-blockfi-to-pay-100m-in-fines-to-us-regulators/" target="_blank" rel="noreferrer noopener">$100 million fine</a> to settle allegations levied by the SEC and other state regulators in February. It was <a href="https://www.bloomberg.com/news/articles/2022-02-12/blockfi-to-pay-100-million-to-sec-states-over-crypto-lending" target="_blank" rel="noreferrer noopener">reportedly</a> one of the largest fines on record imposed on a cryptocurrency company.



Earlier this month, BlockFi was said to be looking to raise cash at a valuation shy of <a href="https://www.bloomberg.com/news/articles/2022-06-07/blockfi-looks-to-raise-new-cash-at-reduced-1-billion-valuation" target="_blank" rel="noreferrer noopener">$1 billion</a>, after raising money to a <a href="https://cms.blockworks.co/blockfi-set-to-increase-valuation-to-almost-5b-through-new-fundraising/" target="_blank" rel="noreferrer noopener">valuation of $5 billion</a> last year, highlighting the current distressed conditions of the crypto market.



BlockFi said on June 16 it had <a href="https://cms.blockworks.co/blockfi-says-it-liquidated-a-large-client-amid-3acs-margin-calls/" target="_blank" rel="noreferrer noopener">liquidated</a> a “large client” that failed to meet obligations, with reports pointing to venture capital firm Three Arrows Capital (3AC) as the unnamed counterparty.&nbsp;



BlockFi CEO Zac Prince said on <a href="https://twitter.com/BlockFiZac/status/1537499456349798406" target="_blank" rel="noreferrer noopener">Twitter</a> that no client funds had been impacted by its 3AC exposure. Yet crypto exchange FTX came to its rescue last week, agreeing to extend a <a href="https://cms.blockworks.co/blockfi-inks-250m-credit-deal-with-ftx-to-ease-liquidity-fears/" target="_blank" rel="noreferrer noopener">$250 million credit deal</a> to ease BlockFi’s liquidity fears. Now longtime backer Morgan Creek Digital is reportedly <a href="https://cms.blockworks.co/blockfi-has-a-new-bidder-in-morgan-creek-report-says/" target="_blank" rel="noreferrer noopener">competing with FTX</a> to acquire a majority stake in the lender.



Fears of contagion have spread rapidly across the crypto industry ever since BlockFi rival Celsius <a href="https://cms.blockworks.co/celsius-lending-platform-suspends-withdrawals-and-transfers/" target="_blank" rel="noreferrer noopener">froze withdrawals</a> on its platform on June 12. Industry commentators have said Celsius’ potential insolvency could prove harsh for the industry in terms of retail investor trust.



While crypto markets are heavily depressed, Martin Hiesboeck, head of blockchain and crypto research at <a href="https://uphold.com/en-us">Uphold</a>, told Blockworks he hasn’t observed contagion spilling into traditional markets so far.



“This could change if the price of bitcoin remains between $10k and $20k for a prolonged time and more protocols backed by traditional financial firms fail,” he said. “As it stands the sums involved can probably be covered by existing crypto behemoths like FTX and Binance, which have moved enormous amounts of USDT and BTC over the network as our on-chain analysis shows.”



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