BlockFi Offers Hodlers Another Alternative to Borrow Against Crypto AssetsApril 23, 2018
Alternatives for lending and borrowing with cryptocurrencies are now on the rise. One of the current start-ups to participate the likes of Unchained Capital and SALT is BlockFi, an NY-headquartered startup, which issues loans backed by ether and bitcoin to people, institutions, and companies in thirty-five states in the US.
Collateralization of crypto assets benefits retail borrowers by letting them hold onto their cryptocurrency assets instead of selling them to make big purchases, such as purchasing a vehicle. Also, they can save on taxes by borrowing from crypto assets versus trading them.
Institutional and corporate borrowers think similar advantages as well as few others, including access to third-party verification, fiat liquidity to help day-to-day business operations and even auditing of cryptocurrency asset holdings and the capacity make huge crypto-backed investments in various markets.
BlockFi yields cryptocurrency as a collateral, providing interest rates on loans of approximately 12%. This is normally lower than indiscreet loans and higher than loans secured along with conventional assets like real estate or securities.
The founding story of BlockFi begins with the experience of CEO Zac Prince working with a bank in Texas to take a mortgage. Zac had taken out an earlier loan with the similar bank before he began to invest in cryptocurrency.
During his second loan application in 2017, he included ether and bitcoin among his assets. Unfortunately, the bank had never heard of Bitcoin before and nearly stopped working with him when they learned that bitcoin was mainly utilized by drug dealers and money launderers. It was that Prince picture a chance to offer a lending invention to assist the borrowing desires of cryptocurrency owners and began to create a plan for what would turn into BlockFi.
Flori Marquez and Prince established BlockFi in NYC, securing a $1.55 million in seed funding in February 2018 from strategic partners Kenetic Capital, ConsenSys Ventures, Lumenay Purple Arch Ventures, SoFi, and PJC.
Prince concluded the partnership of BlockFi, telling Bitcoin Magazine that they were lucky to have a strong interest in their seed round and are thrilled about the strategic value, which their investors base adds to their efforts.
BlockFi will introduce another funding in Q2 that will mainly be utilized for funding loans, along with a Series A raise anticipated in the second half of this year. BlockFi is a safe lender, holding the crypto assets of its clients in a storage address kept by a qualified digital asset defender Gemini Trust Company, LLC. They then transmit the loan currency to the bank account of the client. The client makes interest-only payments on the monthly basis on the loans.
In the long run, BlockFi wishes to provide customer choice for custody solutions along with integration into custody platforms, letting customers get their loan from BlockFi devoid of moving their crypto funds out of the storage.
There’s a wide recognition among crypto market observers, which crypto asset holders require simple access to debt beyond short-term, margin-trading, fragmented options. This innovative liquidity might lessen volatility and facilitate scale.