BlockFi

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 History ==
BlockFi was founded in 2017 to emulate banks in the cryptocurrency area, as well as eventually offering cryptocurrency-denominated credit cards. It started lending fiat cash against cryptocurrency collateral in January 2018. 
In February 2018, BlockFi received a $1.55 million funding in a seed round from ConsenSys Ventures, SoFi and Kenetic Capital, among others. In July it secured another $50 million in funding from Michael Novogratz's Galaxy Digital Ventures.
On April 23, 2019, BlockFi announced that it had more than $53 million worth of cryptocurrencies in its client accounts. 
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. 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.
In February 2020, BlockFi announced it had raised $30 million Series B funding. The company also reported higher earnings and a broadening client base, to which it attributed the hype of its customers for bitcoin's expected halving in May as a major factor.
In October 2020, BlockFi purchased a significant stake in the Grayscale Bitcoin Investment Trust - 24,235,578 shares - representing more than 5 percent of the trust. The shares were for 24,235.578 BTC, worth about $328,040,666.02 at the time. The same month, BlockFi announced that it had become a liquidity provider for the CME Group's bitcoin futures and options contracts.
=== U.K. derivatives ban ===
In November 2020, BlockFi announced plans to launch retail products for customers in Italy, the Netherlands, and Switzerland. This European expansion conspicuously did not include the United Kingdom. BlockFi's Vice President for Europe and Asia, David Olsson, said that the company's plans for the U.K. were "complicated" by the U.K. Financial Conduct Authority (FCA)'s ban on cryptocurrency derivatives, though he didn't rule out future U.K. launches should the country's regulatory climate for cryptocurrency products change in the future.
=== Accidental overpayments ===
In March 2021, BlockFi ran a promotional giveaway in which clients who traded a certain volume in USD between March 18 to March 31 were awarded a bonus in the form of BTC. On March 14, BlockFi tweeted that something had gone wrong and that participants might see inaccurate balances in their accounts. Some users had mistakenly received deposits of as much as 700 BTC. BlockFi began sending emails threatening legal action to its users, demanding the return of the erroneous bitcoin deposits, but also offering $1000 worth of GUSD for their trouble. According to a BlockFi spokesperson, less than 100 people were affected by the accidental overpayments.
=== Bankruptcy ===
BlockFi Inc. filed for Chapter 11 bankruptcy in November of 2022, in the wake of the collapse of the FTX exchange. The company said it would use the bankruptcy process to “focus on recovering all obligations owed to BlockFi by its counterparties, including FTX and associated corporate entities,” but said recoveries were likely to be delayed by FTX’s own bankruptcy. The bankruptcy petition, filed in New Jersey, listed BlockFi’s assets and liabilities at between $1 billion and $10 billion each. The company said in the statement that it had around $257 million of cash on hand. 
BlockFi had been in the process of shifting its assets over to FTX for custody, but the majority of the assets had not been moved before FTX’s collapse. FTX US was listed in BlockFi’s petition as one of its top unsecured creditors, with a $275 million loan.
== 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.
=== 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). The minimum deposit is $20,000.
=== 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. 
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.
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. 
Saying that the bitcoin and ether markets had begun to "position more bullish" and seeking to attract larger deposits, the company announced a new schedule of interest rates it pays on deposits on January 23, 2020.
=== Rehypothecation ===
Rehypothecation is the common but sophisticated practice by a financial institution in which, 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 the assets are its own property.
 
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. While BlockFi's rehypothecation is not unique, it is nonetheless controversial among bitcoin community members.
=== Trading ===
BlockFi announced on December 5, 2019, that starting that day it would provide a cryptocurrency trading platform which would charge no fees or commissions on its customers' trades. Prince told CoinDesk, an online cryptocurrency news service, “Our existing user base wanted to trade and requested that we build a product for trading on our platform.” According to the company, the transactions will be paid for by selling anonymized trading data to hedge funds and other large traders.
=== Visa Bitcoin Credit Card ===
In December 2020, BlockFi and Visa announced a partnership to create a credit card that disburses rewards in the form of bitcoin, rather than airline miles or cash. The card pays approved cardholders 1.5 percent of each transaction made in bitcoin, which is automatically converted (presumably based on market price at the time of the transaction) and added to the cardholder's BlockFi account. The card has an annual fee of $200 and a $250 sign-on bonus (paid in bitcoin) if the cardholder spends $3000 in the first three months of owning it. The card will be available only to U.S. users, though BlockFi's blog mentions a waitlist for interested potential customers in other regions.
=== Bitcoin Trust ===
In January 2021, BlockFi registered the BlockFi Bitcoin Trust with the SEC via a public filing. In February 2021, BlockFi announced the launch of the trust, which will be custodied by Fidelity Digital Assets. The index and pricing metrics for the trust are provided by Coin Metrics.
== 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 ==	
Category:Cryptocurrency
Category:Bitcoin
Category:Ethereum
Category:Loans