After $50 million in fresh capital, crypto lender BlockFi has now raised nearly $100 million in the past 12 months.
Announced Thursday, the latest round, a Series C, was led by Anthony Pompliano’s Morgan Creek Digital. (It’s the second-largest round to be led by the VC firm, with Figure’s $103 million Series C topping the list.)
At the moment, BlockFi has $1.5 billion in crypto assets on its lending platform and is producing a little less than $10 million a month in revenue, CEO Zac Prince said in an interview. He said BlockFi is still trying to add personnel and keep equity capital stable in order to quickly expand geographically.
Prince also expects to have the first bitcoin rewards cards in the market by year’s end and a more public rollout early next year.
“You have to work with quite a few partners to bring a credit card to market,” Prince said. “Some of them haven’t really handled the transition from being fully in-office to being fully remote as smoothly as companies like BlockFi have.”
Other participants in the Series C include Peter Thiel’s Valar Ventures – the lead investor in BlockFi’s A and B rounds – CMT Digital, Castle Island Ventures, Winklevoss Capital, SCB 10X, Avon Ventures, Purple Arch Ventures, Kenetic Capital, HashKey, Michael Antonov, National Basketball Association player Matthew Dellavedova and two unnamed university endowments.
Dellavedova, who is a guard for the Cleveland Cavaliers, first learned about crypto in 2017 and was introduced to BlockFi by Morgan Creek’s Pompliano later on, he said in an interview.
Dellavedova has been making angel investments for the past three to four years, but BlockFi is the basketball player’s first crypto play, aside from holding “a little” bitcoin and ether, he said.
“I would say I’m still a rookie in this space,” he said. “I think having an interest rate that you can have on your crypto is appealing.”
Repeat investor Sterling Witzke, a partner at Winklevoss Capital, said BlockFi’s ability to “resonate with both retail and institutional customers” has been a key selling point. “We look forward to supporting the BlockFi team as they launch their next iteration of products and continue to drive mainstream adoption, firmly cementing crypto at the core of the future of finance,” she said in a statement.
Profits during a crisis
Prince said BlockFi was able to continue its lending operation even after the March bitcoin crash while other lending firms took a short break.
Similar to Genesis and Celsius, BlockFi says March ended up being a good month for crypto lending because of the sector’s primary borrowers – proprietary traders and market makers.
“The event in March, we didn’t like it because there were clients of ours who have borrowed dollars secured by their cryptocurrency holdings, where we had to issue margin calls,” Prince said. “The way that we handled that I believe was more fair and flexible than the way those things are handled on platforms where everything is very black and white.”
While interest rates on fiat-backed crypto loans have trended downward after March, demand for bitcoin-backed dollar loans remains high, he added.
“If you look at the futures curve today, it’s implying north of 15% cost of borrowing cash, which makes sense given the bullish position in the market,” Prince said.
BlockFi’s largest expense is people, Prince said, as the team has grown from just under 100 at the beginning of the year to 175 now, with engineering and security making up half of the staff.
Another major growth area is BlockFi’s risk-management team, including hires related to security infrastructure, compliance and financial risk, Prince said. The lender also has new sales and client-relationship teams in London and Singapore and one employee in Hong Kong.
Part of the Series C will go toward building a larger balance sheet so BlockFi can remain a less risky institution in the eyes of its counterparties. As a general rule, the firm is aiming to have a loan leverage ratio that is more conservative than what you would find at a traditional bank, which typically holds a minimum 5% leverage ratio.
Nothing has changed about BlockFi’s collateral levels or its rehypothecation of loan collateral, Prince added. The CEO claims the firm’s loan and security agreement is more transparent than what customers would find at a securities lender in the traditional markets, where rehypothecation of loan collateral is also common.
“It’s a scary word,” Prince said about rehypothecation. “It’s the folks who are cut from a similar cloth as the ‘not your keys, not your crypto’ crowd.”
Prince would not say whether BlockFi invests customer assets into perpetual swaps, Grayscale Bitcoin Trust shares or other investment vehicles.
“We think about those and would consider them if it’s appropriate within the context of our risk-management function,” Prince said without going into detail.
Prince also admitted that BlockFi does uncollateralized lending to counterparties with “certain financial requirements” but would not say what percentage of the lender’s loan book was comprised of unsecured loans.