BlockFi

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BlockFI
BlockFi.jpg
Founded 2017
Headquarters New York, New York
Key People Zac Prince, Co-Founder and CEO; Lori Marquez, Co-Founder and VP of Growth; Rene van Kesteren,

Chief Risk Officer; Mahesh Paolini-Subramanya, CTO

Products Lending against bitcoin collateral; bitcoin interest-bearing deposit accounts
Twitter @TheRealBlockFi
LinkedIn Profile
Facebook BlockFi
Website BlockFi Home
Releases Company News
Blog BlockFi blog

BlockFi is a New York City-based start-up cryptocurrency financial institution. It lends U.S. dollars against bitcoin and other cryptocurrency collateral, as well as accepting deposits of cryptocurrencies which pay interest to the depositor. BlockFi Co-Founder and CEO Zac Prince has a background both in consumer lending and start-ups.

Company Background

BlockFi was founded in 2017 to emulate banks in the cryptocurrency area, as well as eventually offering cryptocurrency-denominated credit cards.[1] It started lending fiat cash against cryptocurrency collateral in January 2018.[2]

In February 2018, BlockFi received a $1.55 million funding in a seed round from ConsenSys Ventures, SoFi and Kenetic Capital, among others.[3] In July it secured another $50 million in funding from Michael Novogratz's Galaxy Digital Ventures.[4]

On April 23, 2019, BlockFi announced that it had more than $53 million worth of cryptocurrencies in its client accounts.[5]

In August 2019, the company received $18.3 million in funding from a Series A round led by Valar Ventures, which was joined by Winkelvoss Capital, Galaxy Digital, ConsenSys, Akuna Capital, Susquehanna, CMT Digital, Morgan Creek, Avaon Ventures and PJC. The company plans to use the money to double their staff size, according to founder Zac Prince.[6][7] Prince told Bloomberg at the time that the company's revenue had increased significantly since January 2019 (in part, most likely, due to the quadrupling of bitcoin's price during that time), and that he expected BlockFi's income to reach eight figures by the end of 2019.[8]

Products and Services

BlockFi is licensed to lend funds in the states that require it. Cash loans were available in 47 U.S. states as of mid-March 2019.[9]

Collateralized Loans

In the summer of 2018, BlockFi began making U.S. dollar loans to customers who deposited bitcoin with the company. A borrower would receive a loan amount of up to 50% of the value of the deposited bitcoin. The loan could be called if the loaned value reached or exceeded 70% of the value of the deposit (due to a decline in the U.S. dollar price of bitcoin).[10] The minimum deposit is $20,000.[11]

Interest-Bearing Deposits

After a couple of months of testing, on March 5, 2019 BlockFi rolled out the BlockFi Interest Account (BIA), which pays compounded interest on deposits of cryptocurrency with the payments denominated in the cryptocurrency of the deposit. By mid-March 2019, BlockFi had gathered $35 million worth of deposits. At launch, the interest rate paid by BlockFi was 6.2 percent. (According to CoinDesk, BlockFi lends cryptocurrency assets at a rate as low as 4%.) The terms and conditions for the deposit accounts permit BlockFi much flexibility in adjusting the interest rate paid to depositors because, as reported by CoinDesk, CEO Prince said the company needed flexibility to grow fast.[12] The day after an article describing the success of the deposit accounts appeared in CoinDesk, Prince announced that as of April 1, 2019, deposits of more than 25 bitcoin would receive interest of only 2 percent on the amounts above 25 bitcoin.[13]

In April 2019, BlockFi announced that it would reduce the minimum bitcoin balance requirement for customer BIAs to be eligible to earn interest from 1 BTC to 0.5 BTC, due to customer demand. The company also said that this change would be applied retroactively, meaning that customers who had balances between 0.5 and 1 BTC in their accounts for the month of April 2019 would be eligible to earn interest at the end of the month.[14][15]

Rehypothecation

Rehypothecation is the common but sophisticated practice by a financial institution where, with the depositor's permission, it re-uses collateral assets pledged to it (in a loan, bank deposit, or as futures margin, for example) as though it is its own property.[16]

Under the terms of the interest-bearing deposit accounts, BlockFi may lend out the deposited cryptocurrencies in order to gain interest or profit from speculation on price movements.[17][18] While BlockFi's rehypothecation is not unique, it is nonetheless controversial among bitcoin community members.[19]

Key People

  • Zac Prince - Co-Founder and CEO
  • Lori Marquez - Co-Founder and VP of Growth
  • Rene van Kesteren - Chief Risk Officer
  • Mahesh Paolini-Subramanya - CTO


References

  1. After $4M Funding Round, BlockFi Eyes Savings Account, Crypto Credit Cards. Bitcoin Magazine.
  2. $25 Million in 2 Weeks: BlockFi Booms as Bitcoin and Ether Investors Seek Interest. CoinDesk.
  3. Template:Cite , web
  4. BlockFi just gathered up $50 million to lend to bitcoin and ethereum holders who don’t want to cash out (yet). TechCrunch.
  5. BlockFi Now Has Over $53 Million in Client Crypto Under Management. CoinTelegraph.
  6. Thiel-Backed Valar Leads Finance Round for Crypto Startup. Bloomberg.
  7. Bitcoin and Ether Lender BlockFi Raises $18.3 Million Series A. CoinDesk.
  8. BlockFi, which lends money to cryptocurrency holders, just raised $18.3 million led by Valar Ventures. Tech Crunch.
  9. $25 Million in 2 Weeks: BlockFi Booms as Bitcoin and Ether Investors Seek Interest. CoinDesk.
  10. $25 Million in 2 Weeks: BlockFi Booms as Bitcoin and Ether Investors Seek Interest. CoinDesk.
  11. BlockFi, which lends money to cryptocurrency holders, just raised $18.3 million led by Valar Ventures. Tech Crunch.
  12. $25 Million in 2 Weeks: BlockFi Booms as Bitcoin and Ether Investors Seek Interest. CoinDesk.
  13. Crypto Lender BlockFi Cuts Interest Rates Paid to Largest Account Holders. CoinDesk.
  14. A Gemini-Backed Bitcoin Interest Account Is Opening Up To More People. Forbes.
  15. BlockFi Monthly Update – April 23, 2019. BlockFi Blog.
  16. Definition of rehypothecation. Merriam-Webster.
  17. An Introduction to Rehypothecation With Cryptocurrency. BlockFi.
  18. $25 Million in 2 Weeks: BlockFi Booms as Bitcoin and Ether Investors Seek Interest. CoinDesk.
  19. Rehypothecation: BTC’s path to becoming king of collateral. The Block Crypto.