With a 4.5% APY on BTC and up to 9.5% on stablecoins, the BlockFi Interest Account (BIA) is one of the most competitive cryptocurrency interest accounts on the market. The company is valued at over $3B from its most recent Series D and has attracted attention from cryptocurrency and traditionally non-crypto audiences alike.
Our BlockFi explores how BlockFi and other cryptocurrency interest accounts work, and whether it’s worth your time.
BlockFi is a privately held New Jersey-based lending platform founded in 2017.
BlockFi’s flagship product is the BlockFi Interest Account (BIA), which has a few notable features. The BIA
Is BlockFi right for me? BlockFi is a fairly attractive option for individuals that have a beginner to moderate level proficiency with digital assets. Since the platform now offers direct ACH deposits, you only need minimal cryptocurrency literacy to start earning interest.
BlockFi is particularly notable for those keen on generating passive income. Compared to traditional investment accounts, BlockFi offers 43x more than “high-interest” savings accounts with Ally Bank (0.2%) and 4.7x than WealthFront (1.82%). However, it’s worth noting that BlockFi deposits aren’t FDIC insured. A BlockFi account shouldn’t be considered a savings account; it’s an investment account with a unique set of risks that traditional fiat savings accounts in banks do not.
BlockFi offers loans backed by your cryptocurrency with a 50% LTV ratio.
The following BlockFi review contains an exclusive interview with the BlockFi team. It has been written and regularly updated for the BlockFi Interest Account, not for the loan products, BlockFi credit card, or exchange.
BlockFi’s leadership team has decades of experience in the traditional financial services and banking world. The company claims to take a conservative approach to regulation to position itself favourably for sustainable long-term growth and expansion.
Founder & CEO, Zac Prince has leadership experience at multiple successful tech companies. Prior to starting BlockFi, he led business development teams at Orchard Platform, a broker-dealer and RIA in the online lending sector, and Zibby, an online consumer lender.
Co-Founder & VP of Operations Flori Marquez has experience managing alternative lending products. She helped build and scale a $125MM portfolio for Bond Street (acquired by Goldman Sachs) as Head of Portfolio Management. She managed all operations including point of origination, default, and litigation.
Chief Risk Officer, Rene Van Kesteren spent over 15 years at BAML as a Managing Director of ML Professional Clearing Prime Brokerage. He built the equity structured lending platform, including risk and regulatory compliance frameworks. Rene also worked as an equity derivatives trader in Caxton’s Strategic Quantitative Investment Division.
BlockFi has raised a total of $508.7M, valuing the young company at $3 billion. BlockFi’s revenue has grown 10x over the past year, putting it on track to reach $100M in revenue over the next year. With over $1.5B in assets on the platform, and a 0% loss rate across its lending portfolio, BlockFi has made a strong case for establishing itself as a dominant entity in the overarching emerging FinTech space.
BlockFi raised its lion’s share of funding in a $350M Series D, led by new investors such as Bain Capital Ventures, Pomp Investments, Tiger Global, and partners of DST Global. In a press release, BlockFi noted it plans to use the inflow of capital to explore further innovation in its product suite, accelerate new market expansion, and potentially fund new acquisition opportunities.
BlockFi raised $50 million in its Series C led by Morgan Creek Digital, with participating investors such as Valar Ventures, Winklevoss Capital, Kenetic Capital, CMT Digital, Castle Island Ventures, SCB 10X, HashKey, Avon Ventures, Purple Arch Ventures, Michael Antonov, NBA player Matthew Dellavedova, and two university endowments.
Prior to its recent Series C, BlockFi raised $18.3 million in Series A funding led by the Peter Thiel-backed Valar Ventures with participation from Winklevoss Capital, Galaxy Digital, ConsenSys Ventures, Akuna Capital, Avon Ventures, Susquehanna, CMT Digital, Morgan Creek, and PJC.
BlockFi has also raised earlier rounds by SoFi and Purple Arch Ventures.
The team notes that they anticipate raising additional capital in the future to facilitate continued product development and rapid growth.
As of March 2021, the platform has over 265,000 retail and 200,000 institutional clients, with reported monthly revenue of $50m in 2021, compared to $1.5m monthly revenue in 2020.
The BlockFi interest rates are above-average in the cryptocurrency interest account market, and much better, albeit inherently riskier, than cryptocurrency on an interest-free exchange or wallet.
With the exception of Tether at 9.5%, all stablecoins receive 9% interest on all deposits under 40,000, and 8% on any amount above
The interest is paid in its nominal cryptocurrency, so be mindful of the asset’s volatility– the cryptocurrency earned could either be more or less than its USD equivalent at the time of deposit, so plan accordingly.
However, since stablecoins are pegged 1:1 to USD, they theoretically don’t carry the same volatility risk as an asset like BTC.
$10,000 in GUSD will earn you $750 in GUSD for the full year, and since it’s pegged to the U.S. Dollar, you won’t have to be concerned about its price being drastically different (provided something catastrophic doesn’t happen to Gemini or its GUSD.)
Please note that BlockFi charges flat withdrawal fees. which are subtracted from the total withdrawal amount. Users get 1 free withdrawal per month.
BlockFi is a spread business that makes money by borrowing capital at a certain rate (the interest rates it pays to users) and lends it a higher rate (the interest rates it offers for BTC/ETH/GUSD loans). A BlockFi blog post notes that the company primarily works with institutional counter-parties to offer them liquidity. These borrowers consist of:
Based on our research and conversations, BlockFi passes the safety test. Well, it’s about as safe as Gemini, its primary custodian. Gemini keeps 95% of its assets in cold storage and 5% in hot wallets that are insured by Aon.
Gemini is a licensed custodian and regulated by the NYDFS, and it recently received SOC2 compliance from Deloitte for its custody solution.
While BlockFi’s interest rates are appealing, it’s natural for cryptocurrency aficionados to be skeptical– and rightfully so, we tend to be a paranoid breed. That’s what this Blockfi review is for!
Even if we trust a business, which there is little to indicate BlockFi can’t be trusted, the doomsday “what if’s” hold primary real estate in our brains.
We asked the BlockFi team some doomsday questions:
What happens if BlockFi gets hacked?: “Gemini is BlockFi’s primary custodian and BlockFi doesn’t hold private keys directly. Gemini keeps the vast majority of its assets in cold storage and is insured by Aon. Gemini is a licensed custodian and regulated by the NYDFS. They recently received SOC2 Type 1 compliance audit from Deloitte for their custody solution. We encourage users to read more about Gemini’s security. “
What happens if a user account is compromised?: “Since inception, BlockFi has not lost any customer funds. In the event that a user’s account is compromised, which our security protocols have caught in the past, we freeze the individual’s account for one week. Then, we conduct a Videoconference with the affected individual to verify their identity. We can then change their email address and password, so they can regain control of their account.”
What happens if suddenly everyone defaults on their cryptocurrency loans?: “When we lend crypto assets to generate yield, we have an extremely thorough risk management and credit analysis process. We only primarily lend to large, well-capitalized, institutional borrowers, or to counter-parties willing to post collateral and provide the ability to margin call them on a 24/7 basis.”
“What that means is, if we are lending $1M worth of BTC to Firm XYZ, Firm XYZ collateralizes the loan (typically ~120%) by giving us ~$1.2M USD. If the loan were to then enter margin call and the borrower was unable to provide additional collateral (default), we would use their USD collateral to buy crypto.”
“We have actively lent since January of 2018, including throughout multiple periods of high volatility, without any losses across our entire lending portfolio. BlockFi is bound by NDA’s to discuss terms of specific borrowers/rates.”
Signing up for a BlockFi account is fairly straightforward and can be done in under two minutes.
If you’d like to contact customer service, you can reach them at firstname.lastname@example.org.
So far, BlockFi support has been well above average. Let us know how your experience was any different!
Is BlockFi FDIC insured? Well, since FDIC insurance doesn’t apply to digital assets such as cryptocurrencies, your deposits in BlockFi are not covered by FDIC insurance. However, BlockFi uses partner company Gemini as its custodial service, and Gemini does have its own insurance for its deposits. However, take this with a grain of salt, as BlockFi has yet to experience a hack for user funds– insurance is only as good as it works, and it has yet to be determined (and hopefully never will be!)
“The interest we are able to pay is based on the yield that we are able to generate from lending, which directly correlates to the market demand in the space (I.e. what rate institutions are willing to pay to borrow specific crypto assets, as it varies from asset to asset). We are bound by NDAs to discuss specifics (institutions, specific rates, etc).”
“We are able to use stablecoin deposits to fund our consumer loans (average APR is ~10-13%) so we can afford to pay higher interest to GUSD / Stablecoin depositors.”
“Upcoming changes are announced typically 1-2 weeks prior to a new month, giving clients ample notice and time to prepare. The interest we are able to pay is a function of the borrowing demand.
“Gemini is our custodian and has all of the information about what happens in the case of a forked network. Please refer to their user agreement here where you can read more about that.”
“We’re confident that we will become a very large and successful company that provides financial services on a global scale to the benefit of millions of clients. We plan on going through three distinct growth phases based on our addressable market and products:
All of our indicators for this BlockFi review (history, team, communication with support, and business model evaluation) point to yes: BlockFi is legit. There is very little evidence that suggests otherwise. There are a handful of negative reviews online from disgruntled users, but they mostly seem to be rooted in misunderstanding, like assuming the interest was paid in USD and not in BTC/ETH/GUSD.
Whether or not BlockFi is worth it comes down to your risk profile and what you’re doing with your cryptocurrency. The BlockFi interest rates are quite competitive for the industry, and for some digital assets, industry-leading.
If it’s just sitting on an exchange, you may as well reap the benefits of compounded interest. 10 BTC would yield a not insignificant gain of about $850, as well as the benefits or downside of Bitcoin’s price fluctuation, so keep that in mind.
It’s worth remembering that any time your cryptocurrency leaves your hardware wallets, it’s exposed to a higher degree of risk. If BlockFi or Gemini were to experience some (highly unlikely) catastrophic hack, your cryptocurrency would be at risk.
Our BlockFi review comes back positive. After speaking with team representatives, and with their support team on the client-side, we look forward to seeing BlockFi establish itself further in the space.
Projects such as BlockFi simply existing provide cryptocurrency investors a much-needed diversification of revenue streams, something that die-hard HODLers have missed through the past few years.
Editor’s Note/disclaimers: The above article isn’t investment advice. This review is written for educational and entertainment purposes.