Crypto Accounts Yielding 7% Spur Scrutiny as States Warn of Risk

State regulators say some interest-bearing crypto accounts with billions of dollars in deposits appear to be unregistered securities that aren’t disclosing their risks to investors.

The warnings are coming from states as varied as New Jersey -- a longtime financial outpost -- Alabama and Kentucky, which are among states that have already brought actions against BlockFi Lending LLC and its affiliates. The regulators’ focus makes the accounts the latest facet of the burgeoning crypto industry to attract government scrutiny.

These accounts offer yields on deposited Bitcoin and other cryptocurrencies that dwarf the returns from bank savings accounts. In some cases, ...