Centralized cryptocurrency lender, BlockFi, recently disclosed its outstanding loans. According to the company, this amount stood at $1.8 billion at the end of the second quarter and these were from retail and institutional investors. Moreover, its ‘net exposure’ was around $600 million.
The crypto lender made the disclosure via a report called the ‘Q2 2022 Transparency Report’, which was published on Thursday. In this document, the company highlighted its risks pertaining to credit and liquidity and also provided details about its retail and institutional loan portfolios.
There are $1.8 billion in loans that are outstanding right now and the company disclosed that $600 million of this figure comprises uncollateralized loans. Of the total loans outstanding, $1.5 billion are categorized as institutional loans, while the remaining $300 million are retail loans. The outstanding loan amounts of BlockFi and its holdings were calculated by using the price of $19,986 per bitcoin as a reference point.
According to BlockFi, the company has come up with guidelines that can help it in maintaining the liquidity required for meeting all obligations in accordance with its core business activities. These include their trading activities as well as their retail and institutional borrowing.
These guidelines dictate that the company will hold a minimum of 10% of its inventory of the total amount that it owes. This way, it will have the funds available on demand to be returned to customers. Furthermore, 50% of the funds that it owes will be kept in places from where it is possible to retrieve and return the funds within a week.
Likewise, about 90% of the amount that BlockFi owes to clients will be kept in loans that can be called back within 12 months, or in inventory.
These new liquidity guidelines were introduced by the crypto lender a couple of weeks after it signed an agreement with crypto exchange FTX. The latter will provide $400 million as a ‘credit facility’ to BlockFi and the deal also includes the option of acquiring the company based on its performance for a value of $240 million.
The deal was put together after reports of Three Arrows Capital (3AC) defaulting on its loan from BlockFi. The crypto lender also talked about risk management via a blog post. It said that uncollateralized loans are only offered by the platform to clients that belong to ‘Tier 1’. This refers to institutional clients with a significant amount of capital, who are ready to be transparent and their financial statements are audited by third parties.
The clients that belong to ‘Tier 2’ and ‘Tier 3’ are not given the option of getting an uncollateralized loan on the BlockFi platform. The topic of liquidity has become a controversial one in the decentralized finance (DeFi) space these days because of the bankruptcy of a number of companies recently, due to a downturn in the crypto market. These include crypto lending platforms Celsius Network and Voyager Digital, along with crypto hedge fund 3AC.