BlockFi, a financial company focused on cryptocurrencies, says it has enabled a new feature that will let customers use cash to buy bitcoin.
Previously, the Jersey City, N.J.-based crypto lender only allowed customers to bring digital assets onto its platform, such as stablecoins linked to the U.S. dollar, CEO Zac Prince said in a phone interview. The system relied solely on “crypto payment rails,” he said.
Starting Tuesday, customers can send cash to BlockFi via wire transfers through a partnership with Silvergate Capital, a bank holding company based in La Jolla, Calif. The publicly-traded Silvergate is one of the few commercial lenders willing to do business with cryptocurrency-focused companies.
The cash transfers can also be used to deposit money with BlockFi and earn interest, currently set at an 8.6 percent annual rate – some 860 times higher than the 0.01 percent rate offered on a JPMorgan Chase bank account. Unlike Chase, BlockFi isn’t a bank, however, so the accounts don’t come with federal deposit insurance. But also unlike Chase, BlockFi lets customers choose an option that lets them get the interest paid in bitcoin.
“In an increasingly low-yield and volatile market, opportunities like earning 8.6 percent on stablecoin deposits with BlockFi stands out in the crypto sector,” Prince said in a statement. “Adding support for inbound wires will facilitate increased liquidity on BlockFi’s platform, which flows through and improves liquidity in the broader crypto ecosystem.”
More individual investors are becoming interested in cryptocurrencies, especially following the recent outperformance of bitcoin compared with U.S. stocks. Fears related to the economic impact of the spreading coronavirus have sent the S&P 500 Index of large U.S. stocks down 15 percent on a year-to-date basis. Bitcoin, by contrast, is up 13 percent in 2020.
Prince said BlockFi started developing the new wire-transfer capability after being inundated by “requests every day from our existing clients, and also from folks who aren’t already cryptocurrency owners.”
BlockFi, founded in 2017, announced in February it had raised $30 million in fresh funding from investors including Valar Ventures, Morgan Creek Digital and Winklevoss Capital. The closely-held company disclosed last month that it had $650 million of assets on its platform, including cryptocurrency-backed loans, and that revenue surged 20-fold in 2019.
The company said in Tuesday’s statement that it recently obtained a money-services business license from the state of Florida, allowing residents of the state to use BlockFi’s trading service and interest accounts.
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