Liquidity issues in the cryptocurrency market have forced some major companies to release transparency reports focusing on the ongoing crisis. BlockFi, a centralized crypto lender, has published its own quarterly report. transparency report after receiving a much needed financial injection from FTX.US.
Last month, the lender received a $400 million revolving line of credit from the US exchange, but has not yet drawn on it.
In its quarterly report published on July 22, BlockFi disclosed the assets it holds on its platform and how it manages all related liquidity and credit risk.
According to the report, BlockFi currently has $1.8 billion in outstanding loans to borrowers. Because the platform does not require all of its borrowers to provide collateral, these loans, worth about $600 million, are currently unsecured.
In total, $1.5 billion worth of loans were issued to organizations such as hedge funds, market makers, private trading firms, exchanges and miners. Since all institutional clients go through a credit check process, BlockFi allows a certain number of them to access loans without collateral.
“Do we require institutional borrowers to post collateral, and if so, the type and level of collateral we require depends on the borrower’s credit profile and the size and composition of the loan portfolio,” the company said.
The remaining US$300 million of outstanding loans consists of retail loans, all of which are overcollateralised. BlockFi said it only allows its retail clients to borrow up to 50% of their collateral, which is subject to liquidation.
The company announced that it has developed a set of guidelines that will enable it to manage liquidity risks and meet its obligations to institutional and retail borrowing clients. Namely, BlockFi will withhold at least 10% of the total due to customers ready for immediate refunds on demand. At least 50% of amounts owed to customers will be held in inventory or credit, which can be withdrawn within seven calendar days. Finally, at least 90% of the total amount owed to customers will be held in inventory or credit, which can be called back within one year.
Currently, BlockFi holds approximately $3.9 billion worth of various digital assets, including stablecoins. About $2.6 billion of this amount was committed to the company under various loan agreements, and $1.3 billion was collateral provided by its borrowing clients.
More than a third of the $3.9 billion the company owns is readily available and stored with third-party custodians and multi-party computing wallets and accounts. However, the company noted that some of these accounts may include hedging assets. About 4% of those assets were deployed “as investments” or “for non-custodial rates,” BlockFi said, but did not provide further details on where the funds were invested.
Credit : cryptoslate.com