Crypto Lenders Must Cease Services Due to California Order
In a surprising turn of events, California's financial regulator has ordered MyConstant, a leading crypto lending platform, to cease all of its services. As the regulatory landscape for cryptocurrencies continues to evolve, this news comes as a shock for many who have been using the platform for their lending needs. Read on to discover what this means for the future of cryptocurrency lending and what other platforms may be affected by similar orders in the future.
What is a Crypto Lender?
A crypto lender is a type of financial institution that offers loans in cryptocurrency. In order to obtain a loan from a crypto lender, borrowers must first put up their cryptocurrency as collateral. Crypto lenders typically offer loans with terms of one year or less.
Crypto lending is a relatively new phenomenon and as such, it is not yet regulated by any governmental body. However, this does not mean that crypto lenders are free to operate without consequence. Recently, the state of California issued an order requiring all crypto lenders to cease operations within the state. This is due to the fact that many crypto lending startups have been operating without obtaining the proper licenses.
Many crypto lenders are already registered and licensed in other jurisdictions, and they will likely continue to operate in those areas. Moreover, it is possible that other states will follow California's lead and begin cracking down on unlicensed crypto lenders. For now, however, borrowers looking for a loan in cryptocurrency will need to look elsewhere.
What is MyConstant?
MyConstant is a lending platform that offers crypto-backed loans. MyConstant is one of the few platforms that offers this service and it is currently available to residents in California.
The current order from the California Department of Business Oversight (DBO) requires all crypto lenders to cease operations in the state. This includes MyConstant, which must stop offering its services to Californians immediately. The DBO’s order is in response to recent concerns about the risks associated with these types of loans.
If you are a Californian who has taken out a loan from MyConstant, you should contact the company immediately to arrange for repayment. The DBO’s order does not relieve you of your obligation to repay your loan.
Why did California order the halt of MyConstant’s services?
As of January 1st, 2020, crypto lending platforms like MyConstant are no longer allowed to offer their services to residents of the state of California. This is due to a new law that was passed by the California State Legislature, which requires all businesses that engage in the business of lending money to obtain a license from the Commissioner of Business Oversight.
While this may seem like a sudden and drastic change, it’s actually something that has been in the works for quite some time. In fact, the bill that eventually became this law was first introduced back in February of 2019. It went through several amendments and revisions before finally being passed by both the state Assembly and Senate in September of 2019.
So why did California decide to crack down on crypto lending? There are a few reasons.
First, there’s the matter of consumer protection. Lending money is a serious business, and when done improperly, can lead to people getting into debt they can’t afford to repay. By requiring companies like MyConstant to obtain a license, California is ensuring that they meet certain standards and consumer protections.
Second, there’s the issue of taxes. When companies lend money without a license, they aren’t subject to the same taxes and regulations as licensed lenders. This means that they have an unfair advantage over traditional lenders, who do have to comply with these laws.
Finally, there’s the matter of preventing
Conclusion
The order from the California Department of Financial Protection and Innovation is making it difficult for some crypto lenders to continue offering their services. While this may be a setback, it's important to remember that regulations are necessary in order to protect consumers. Regulations such as these help ensure that businesses operate responsibly and ethically, which ultimately helps create an equitable environment with fair practices for all involved. Hopefully, with more collaboration between regulators and the industry, we can find solutions that allow crypto lenders to provide their services without compromising consumer safety.