By: Hugh Sifu
BlockFi is one of the more intriguing companies out there regarding the crypto financial space. They are a rare platform that actually seems to disincentivize trading coins with high, albeit transparent, trading activity fees. This being said, they are a legitimate lending platform that will likely be a leader in the space in the future. As with all good news eventually there comes bad news, as is the way of life, which is why we will also provide you with certain cautions and issues BlockFi is facing in the constantly evolving regulatory environment.
BlockFi is a growing platform with users increasing from 100,000 to 600,000 in 2021 alone. Not only that but they are one of very few crypto platforms that actually answers a phone when you have an issue. This means that you’re never more than one phone call away from understanding what is happening with your money, something I’m finding more and more important in this new age of robots fixing (but not fixing) my issues. They have a Blockfi Rewards Credit Card that allows you to spend your fiat current and get rewards back in the coin of your choice. So, for every dollar you spend you get 1.5% back in BTC, ETH, LTC, or one of many different stablecoins, to mention a few. You also have the ability to switch your rewards at any point which enables you to get your rewards one month in BTC and the next in ETH and so on.
Speaking of rewards, you get upwards of 9.5% APY paid out monthly for holding certain coins. Depending on the size of your holdings, you can get paid hundreds to thousands of dollars a month in a stablecoin or BTC, or again whatever coin you prefer, assuming they offer it on their platform. While these rates vary depending on the quantity of your holding for each coin, they are all wildly greater than that of sitting in a traditional bank account and do not, at the moment, require any minimum holding to make these returns. For example, at most banks you’re struggling to find a 2% APY and losing out largely to inflation alone.
Lastly, another great feature that BlockFi offers other than holding and spending would be that of actually acquiring a loan from the crypto asset that you hold. Yes, that means when you have 1 bitcoin, you can actually put that bitcoin up as collateral and use it to fund the down payment of a house or anything else you’d like to use it for. You can obtain a collateralized loan using either BTC, ETH or LTC. They are a leader in bridging the gap of traditional financial intuitions, those institutions that typically scoff at any mention of crypto as collateral, and those individuals who have a large amount of their net worth in crypto, but not fiat.
Obviously, with the good, comes the bad. Although there aren’t many drawbacks to such a leading-edge company, there are still some. One being that of unfavorable loan terms. Another being that of regulatory scares in the space that would potentially affect BlockFi’s interest earning accounts (BIAs).
For the latter of the two, you might have issues signing up for an interest earning account if you are from New Jersey, Texas, Alabama, Vermont or Kentucky as these are the states currently questioning the operations of the BIAs. As with most everything crypto at the moment, of course they are not insured by FDIC or SIPC which is why some have questioned the interest earning portion of BlockFi’s business operations. BlockFi’s says “We believe that our products and services are lawful and appropriate for crypto market participants, and we remain steadfast in our commitment to protect consumers’ rights to earn interest on their crypto assets”
For the former, the bad being your Loan-to-Value, is 50%. This means if you wanted to take out a $10,000 loan, you’d need $20,000 worth in the crypto to borrowing against. At the time of this writing, for the $10,000 loan you’d need around .48 BTC as collateral, if you’re borrowing with BTC. This is specifically designed to help those not wanting to sell their crypto or for those who are crypto rich the ability to continue to hold on to their crypto without having to sell.
There are a lot of moving parts for crypto while this massive industry develops. As more regulation rolls out, a lot of these programs and companies will have to adapt swiftly. Having said that, with 9.5% interest rates, and the ability to spend my fiat and earn crypto of my choice, it seems like a no brainer. Expecially in an industry focused almost entirely on a solid store of value. BlockFi is no doubt a cutting edge company with great development and sleek yet easy to use platform (better than most banking apps in my opinion).