BlockFi Becomes First Institutional Investment in Crypto-Backed Loans for Bitcoin and Ether
A New York-based startup has raised $52.5M to expand its crypto-lending operations. The funding round was led by Galaxy Digital, the digital currency and blockchain technology investment firm founded by Bitcoin king Mike Novogratz. BlockFi, a leading cryptoasset-to-USD lender, becomes the industry’s first institutional investment in crypto-backed loans. Investors include ConsenSys Ventures and PJC.
The firm allows Bitcoin and Ether investors to borrow against their crypto without having to sell it. Clients make monthly interest-only payments in dollars or crypto. At the end of the term, the principal can be paid off, with no prepayment penalties, or refinanced.
“A robust lending market is the keystone for financial systems, and BlockFi’s institutional approach and deep lending expertise were key drivers in our decision to partner with them,” said Novogratz, who recently said a “herd of institutional investors” is getting into crypto.
BlockFi clients are using crypto asset-backed loans to launch startups, pay down higher-cost debt and to diversify their portfolios with real estate assets and other traditional investments. BlockFi’s goal is to create a lending platform that looks like a traditional large scale creditor.
“The support we’ve seen from existing clients and investors highlights the strong demand for leveraging Bitcoin and Ether for low-cost USD loans,” said CEO and co-founder Zac Prince.“We look forward to expanding our services to support more cryptocurrencies and geographic markets in the near future.”
The company currently operates in 40 states and started lending in January 2018. Its expansion plans are reliant on a regulatory approach, and on its team of executives from the traditional finance sector. Chris Ferraro, Head of Principal Investments at Galaxy Digital Ventures, joined the BlockFi Board of Directors; and Rene van Kesteren, a former Managing Director at Bank of America Merrill Lynch, joined BlockFi as Chief Risk Officer.
“BlockFi has differentiated itself in the lending business with capital cost and scale, which will help them raise incremental institutional capital as demand grows”, said Ferraro.
By opening the door to Bitcoin and Ether-backed loans, the company brings additional liquidity to the blockchain sector and establishes a new financial bridge between cryptocurrencies and the financial sector.