By Tanaya Macheel
BlockFi, the provider of crypto asset-backed loans, has launched what is effectively a high-yield savings account.
The BlockFi Interest Account allows retail, corporate, and institutional investors to deposit their bitcoin and ether into an account with 6 percent compound interest paid at the beginning of every month in bitcoin or ether. A beta version of the account launched in January and currently has more than $10 million in customer deposits, according to BlockFi CEO Zac Prince in an exclusive interview with Cheddar Tuesday.
“One of the things we’re most excited to hear from some of those beta users was ... that it actually motivated them to buy more bitcoin or more ether because they were really excited about this functionality,” said Prince. “The second thing, which came from a user on Reddit, was that we were making it fun to HODL again.”
(HODL is slang in the crypto community for holding a cryptocurrency rather than selling it.)
Accounts with at least 1 BTC or 25 ETH in balances are eligible to earn interest, but BlockFi plans to reduce the minimum in the future. Reserves are stored with Gemini, the custodian run by Cameron and Tyler Winklevoss and a New York trust company licensed by the New York State Department of Financial Services.
BlockFi generates interest on assets in Interest Accounts by lending them to institutional and corporate borrowers on overcollateralized terms.
“We benefit from the insurance provided on the [Gemini] platform… and then we generate the yield by lending to institutional investors who often post collateral in the form of USD above the value of the crypto that we’re lending them,” Prince said. “We take advantage of the same risk management system that we built to launch the USD loan side of things, that has performed perfectly all throughout the bear market of 2018.”
Prince also said the lending business has been growing steadily, in part driven by its recently introduced price segmentation. When BlockFi launched its loans in January 2018 it charged 14 percent to borrow USD, secured by cryptocurrency. Today it has various price tiers and users can borrow as low as 4.5 percent, he said.
For full interview click here.