BlockFi revealed that as of the end of Q2, it had $600 million in “net exposure” and $1.8 billion in outstanding loans from institutional and retail investors.
BlockFi, a cryptocurrency lender, published its liquidity and credit risk management practices as well as the total number of loans and net risk exposure it had at the end of the second quarter of 2022.
The information was revealed in the company’s July 21 Transparency Report for Q2 in which it described the risks to liquidity and credit as well as its institutional and retail loan portfolios. The company indicated that $600 million of the $1.8 billion in outstanding loans to customers are uncollateralized loans.
Of the total outstanding loans, institutional loans made up $1.5 billion, while retail loans made up the remaining $300 million. The firm used a Bitcoin (BTC) price of $19,986 as a benchmark for its assets and outstanding loan amounts.
In order to “keep the liquidity sufficient to meet all our responsibilities under our primary business activities, including institutional and retail borrowing and trading activities,” BlockFi stated it has developed rules.
According to those rules, it must keep at least 10% of the total amount owed to clients in inventory that is available to be given back to them upon request.
Additionally, it will keep at least 50% of the money due to customers in locations where it can retrieve it and give it back to them within a week, and at least 90% of the total money owing to customers will be kept on hand in the form of merchandise or loans that can be repaid within a year.
A few weeks ago, BlockFi and cryptocurrency exchange FTX.US agreed to provide BlockFi $400 million as a “credit facility,” with the opportunity to purchase the company for up to $240 million based on performance criteria.
The agreement was reached when Three Arrows Capital, a significant crypto investment company, apparently missed a payment on a loan from BlockFi.
BlockFi stated that it exclusively offers uncollateralized loans to debtors it considers “Tier 1” clients in a post describing its risk management on July 20. Institutional customers who meet the criteria for Tier 1 clients include those who have “a significant capital base, financial statements audited by reputable third parties, and a willingness to be transparent and engaged with” BlockFi.
It is not permitted to make uncollateralized loans to the clients it deems to be “Tier 2 and Tier 3” clients.
