BlockFi had $600 million in unsecured crypto loans in Q2
by Arthur · July 23, 2022
Crypto lending platform BlockFi had “loan exposure” totaling $600 million by the end of June, according to the company’s “Q2 2022 Transparency Report,” released on Friday.
The report showed that BlockFi had an institutional and private loan portfolio totaling $1.8 billion, with $1.2 billion in loan collateral. The firm defines its net “exposure” to a loan counterparty as “the fair value of loans to the counterparty minus the fair value of collateral provided by the counterparty.” This means that over half a billion dollars lent by BlockFi in the 2nd quarter was not covered by collateral.
Collateral refers to assets posted by borrowers to lenders as security against borrower default. If the borrower is unable to repay their debt, BlockFi can “liquidate” their collateral, assuming permanent ownership of the funds.
For example BlockFi liquidated the now-bankrupt crypto hedge fund Three Arrows Capital last month, with BlockFi CEO Zac Prince claiming at the time that no client funds were affected by the incident.
“We require many, but not all, borrowers to post different levels of collateral depending on the borrower’s credit profile,” the company explained in the report.
BlockFi reported that the real value of stablecoins and digital assets stored in customers’ wallet accounts was about half a million. Wallet accounts are non-interest-bearing custodial accounts from which BlockFi does not distribute assets for “income-generating activities,” the report said.
However, the firm owns an additional $2.6 billion in digital assets borrowed from customers through its BlockFi Interest Account (BIA) and BlockFi Personalized Yield (BPY) programs. These assets are used for BlockFi’s retail and institutional lending activities and to facilitate trading on their behalf.
As of June 30, the platform’s total deployable assets – consisting of BIA, BPY and customers’ loan collateral – totaled $3.9 billion. At BlockFi, loan collateral is also used for lending, investment and rehypothecation (reusing collateral for BlockFi’s own financing), without the firm needing to retain “a corresponding amount of digital assets.”
BlockFi accepted a $250 million revolving credit facility from FTX in June to stay afloat while the bear market began. Still, Prince has sought to distance himself and his company from other troubled firms such as Voyager Digital and rival cryptolender Celsius, both of which have filed for bankruptcy and frozen user withdrawals.
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