BlockFi to Increase Deposit Rates, Removes Free Monthly Withdrawal
BlockFi CEO, Zac Prince, announced Friday that the crypto lender would increase deposit rates and rescind a policy permitting one free withdrawal per month.
This announcement comes after BlockFi had provisionally secured a $250 million revolving credit line from FTX and laid off 20% of its staff to improve its finances. Rates for BTC, ETH, USDC, GUSD, PAX, BUSD, and USDT deposits into its BlockFi Interest Account (BIA) will increase from July 1, 2022, while the company will reduce fees for withdrawing BTC, ETH, and stablecoins.
BlockFi defends new rates
To support its new pricing initiatives, the firm said its previously conservative rates had made room for greater customer rewards during the current market downturn.
BIAs are rated according to the amount of cryptocurrency held in each. Tier 1 bitcoin accounts that have 0-0.1 BTC will benefit from a 0.5% increase in Annual Percentage Yield, Tier 2 bitcoin accounts holding more than 0.1 but less than 0.5 BTC will attract 2% more APY, while Tier 3 accounts holding more than 0.35 BTC will receive a 0.9% increase. Tier 1 ETH accounts will earn 0.5% more APY, Tier 2 accounts 0.5%, and Tier 3 accounts 1.75. Outside the U.S., Tier 1 accounts holding USDC, GUSD, PAX, and BUSD will earn 1.5% interest, Tier 2 2%, and Tier 3 3%. Inside the U.S., these stablecoins will earn 0.5%, 1%, and 2% APY for Tiers 1,2, and 3, respectively.
Withdrawals of BTC, ETH, and stablecoins will attract fees of 0.00025 BTC (about $5), 0.01235 ETH (about $15), and $25, respectively. BlockFi said that 75% of crypto withdrawals had been executed free of charge in 2022, with the company shouldering the cost. Hence it feels comfortable charging a maximum of $25 for withdrawals.
BlockFi expressed confidence in its new strategy, saying that it faced less competition from other companies due to 100% uptime of its retail platform and institutional lending desk while others paused withdrawals. It also pointed to the rise in U.S. Treasury yields boosting lending and deposit rates. Treasury yields are the annual interest paid out to investors holding a government security. According to Investopedia, treasury yields affect lending rates to businesses and consumers for buying vehicles and certain fixed assets, like property and capital equipment.
Could FTX loans foreshadow acquisitions?
Some analysts believe that investments by FTX CEO Sam Bankman-Fried to prop up crypto firms Voyager Digital and BlockFi shadow the role played by authorities in rescuing banks during the 2008 recession. Bankman-Fried recently lauded BlockFi’s leadership in decisively eliminating counterparty risk when it liquidated the position of Three Arrows Capital after the hedge fund failed to meet lender margin calls.
FTX and other large cryptocurrency exchanges like Binance have played a critical role in saving other companies during crises. Last year, FTX loaned $120 million to crypto exchange Liquid, which it later acquired after the exchange lost $90 million in a hack, while Binance this year rescued Axie Infinity developer Sky Mavis after a hack saw the company losing $600m.
What do you think about this subject? Write to us and tell us!
All the information contained on our website is published in good faith and for general information purposes only. Any action the reader takes upon the information found on our website is strictly at their own risk.