On Tuesday (April 23), FinTech startup BlockFi announced new terms of service for its Bitcoin (BTC) and Ether (ETH) interest accounts, and said that it had made the BlockFi Interest Account (BIA) available in India.
BlockFi, which is based in New Jersey, United States, was founded in July 2017 by Zac Prince (CEO) and Flori Marquez (VP of Operations) and launched in August 2017. Among others, it is backed by ConsenSys Ventures, Fidelity subsidiary Deonshire Investors, Morgan Creek Digital, and Mike Novogratz’s Galaxy Digital.
In April 2018, BlockFi started offering USD loans collateralized by your cryptoassets (Bitcoin and Ether). Roughly six months later, it expanded the range of cryptoassets that it accepts as collateral to Litecoin and stablecoin Gemini dollar (GUSD).
… users can securely store their Bitcoin or Ether at BlockFi and receive 6% annual interest, paid monthly in cryptocurrency. Interest earned in a BIA compounds monthly, delivering an industry-leading APY of 6.2%. The program has been in private beta since the beginning of 2019 and already holds over $10 million in assets from retail, corporate, and institutional crypto investors.”
BlockFi said that this product offered the following advantages over competitors:
- compound interest
- institutional backing
- interest paid monthly in crypto (i.e. in BTC if you have a Bitcoin interest account and in ETH if you have an Ether interest account)
- no-notice withdrawals
We also found out via the FAQ section of the BlockFi website that although “there is no minimum or maximum deposit for the BlockFi Interest Account,” only “deposits over 1 BTC or 25 ETH will accrue interest” and that “6% interest will only be earned on balances below 250 BTC or 7500 ETH.”
Sadly, on March 20, some bad news was announced for holders of the BlockFi Interest Account with large balances (over 25 BTC or over 500 ETH).
BlockFi said that since the launch of the BIA program, it had discovered that “approximately 75% of BIA clients have a balance of less than 5 BTC or 150 ETH,” and that the “median account balance is $7,000 USD.”
Furthermore, it had seen “unanticipated demand from businesses like crypto hedge funds and VC firms,” and realized that these firms open large BlockFi interest accounts “as a way to bolster their returns.”
BlockFi added that “starting April 1st, only BIA balances of up to and including 25 BTC or 500 ETH (equivalent to roughly $100,000 and $70,000 respectively) will earn the 6.2% APY interest rate,” while “balances over that limit will earn a tiered rate of 2% interest.”
The second bit of bad news—this one affecting everyone not just BTC/ETH whales—was that from April 5, it will be “adding a flat withdrawal fee of 0.0025 BTC and 0.0015 ETH.”
In today’s announcement, BlockFi had several interesting things to say:
- As of April 2019, BlockFi is holding $53 million in crypto deposits for its clients in BIAs, and these funds are earning interest every day.
- BlockFi is “retroactively” (as of April 1) reducing the minimum balance requirement for the Bitcoin BIA from 1 to 0.5 BTC. It hopes to reduce this minimum balance limit even further in the near future.
- For Ether BIAs, from now on, only balances up to 250 ETH will earn the higher interest rate (i.e. 6.2% APY), whereas balances over this limit will earn only the lower interest rate (2% APY). BlockFi says that its “ability to pay interest to our clients is based on crypto market lending conditions,” and since (1) it needs to “work with institutional counterparties to generate this yield” and (2) “demand for borrowing ETH has dropped” during the past month, its has no choice but to adjust “ETH tier rates” accordingly.
- The BIA product is now available in India. This brings the total number of countries served by BlockFi to 65.
Featured Image Courtesy of BlockFi