What is BlockFi and is it Any Good?

Key Points

• BlockFi is a holistic platform for cryptocurrency fans. You can buy, sell, store, and trade assets in one place.
• BlockFi began in 2017 with two founders, Zax Prince and Flori Marquez.
• The BlockFi Credit Card operates as any standard credit card would; only rewards are paid in bitcoin

BlockFi is one of the leading players in the world of cryptocurrency, particularly around the new concept of banking with digital assets. Within a short time of entering the space, it quickly became one of the largest organizations and continues to grow. BlockFi offers a few products, despite removing its foundational service after the SEC issued a specific ruling on it.

This is a complete guide to BlockFi, including its history, current products, and more. Let’s get started.

The History of BlockFi: What to Know

BlockFi began in 2017 with two founders, Zax Prince and Flori Marquez. The platform is a privately held lending platform that operates within the cryptocurrency space. The company primarily deals with digital assets, with its services directly related to cryptocurrency and digital tokens.

Founded in the United States, BlockFi is a centralized cryptocurrency financial platform, as opposed to a decentralized financial platform (DeFi). As such, the company reports earnings to the IRS, sends users 1099s, and allows for direct purchasing of crypto through a standard banking account.

The primary offering that BlockFi was known for was its BIA or BlockFi Interest Account. In many ways, its BIA was what brought them the early success they experienced, with earnings of over $100 million per year. Soon after, the company launched other products, including its digital wallet (BlockFi Wallet), credit card, trading accounts, loans, and more. Since its inception, BIAs have offered up to 4.5% returns on bitcoin and 9.5% returns on stablecoins.

In 2022, the Securities and Exchange Commission announced they had settled with BlockFi for 100 million dollars for violating the Securities Act of 1933 and the Investment Company Act of 1940. The resulting settlement requires a massive payout from BlockFi, harming their reputation and forcing them to remove their primary service, the BIA.

Currently, BlockFi operates with three primary services, including the BlockFi Credit Card, BlockFi Wallet, and a loaning platform.

The Founding of BlockFi: How it Happened

BlockFi was founded in 2017 by Zac Prince and Flori Marquez. As stated on the official website:

BlockFi was created to provide credit services to markets with limited access to simple financial products. BlockFi sets itself apart from other crypto service providers by pairing competitive rates with institutional-quality benefits.

https://blockfi.com/mission/

Part of what sets BlockFi apart from other crypto investment platforms is its centralized nature and relationships with other large crypto firms. The centralized nature of the company allows it to be regulated (in part), while other DeFi platforms are not. With crypto being so unstable, BlockFi was founded as a way to bring an institutional structure to an otherwise chaotic market.

Currently, the company maintains offices in New York, New Jersey, Singapore, Poland, and Argentina.

BlockFi Through The Years

2017

The company was founded in August 2017 by two people, Zac Prince and Flori Marquez. They began operating out of Jersey City, New Jersey, offering collateralized crypto loans to users. At some point in its initial year, BlockFi began offering crypto-denominated credit cards.

2018

In February of 2018, BlockFi was able to secure $1.5 million worth of seed funding from companies ConsenSys Ventures, SoFi, and Kenetic Capital. Only a few months later in July, BlockFi acquired another $50 million in seed money from Galaxy Digital Ventures.

2019

By April of 2019, BlockFi announced they had officially reached over $50 million worth of crypto assets from client accounts. Additionally, the company announced more funding worth around $20 million. During the first half of 2019, the BIA was launched, drawing more clients. Zac Prince, the founder, announces an eight-figure revenue by the end of the year. By December, the company officially announced over $100 million in assets by the first half of the year. In December, it was announced that the BlockFi crypto trading exchange had gone live.

2020

2020 was a big year for BlockFi. Within a few months, they announced over $50 million in monthly distributions to clients, an additional $30 million in funding, and increased earnings. They launched the Bitcoin Rewards Credit Card, the BlockFi Mobile App, and partnered with Symphony, a banking and lending platform. Additionally, they purchased a large share in the Grayscale Bitcoin Investment Trust, roughly 5% of the total shares. Around the same time, they announced they had become a liquidity provider for the CME Group’s (the world’s largest derivatives exchange) futures and options contracts.

2021

BlockFi begins to face scrutiny over its BIA accounts and the SEC begins to take a closer look at the company. Additionally, the company landed $350 million in funding. At some point during the year, the company officially hit $3 billion in valuation.

2022

2022 began a rough period for BlockFi when the SEC fined them $100 million for violating the Securities Act of 1933 and the Investment Company Act of 1940. As a result, BlockFi discontinued BIA accounts for new customers, although existing users still utilize them, just in a different format.

What are the Most Important Products from BlockFi?

BlockFi Wallet

If you want to interact with digital assets, you need a place to keep them. Almost every platform in the game has its wallet, and BlockFi is no different. Essentially, the BlockFi Wallet is a centralized hot wallet that allows you to store cryptocurrencies safely and securely.

Important notes about the BlockFi Wallet:

• Allows for ACH trades with Instant Bank Transfers
• Centralized wallet (owned and operated by a central third party)
• Scheduled purchases
• Tax reporting tools
• No hidden fees or minimum balances
• Only supports a small number of coins

Credit Card

The BlockFi Credit Card operates as any standard credit card would; only rewards are paid in bitcoin. This card is backed by Visa and is accepted anywhere most credit cards are accepted. Still, there are a few things to note:

• BlockFi offers an intro bonus of 3.5% bitcoin back for 90 days (up to $100)
• An additional .25% back on crypto trades on the platform
• An additional 2% back after spending $50,000 annually

Additionally, the card comes with some basic Visa benefits like luxury hotels and premium car rental services, access to the Visa Signature® Concierge, and more.

Trading Account

Part of the BlockFi ecosystem is their crypto exchange. Their exchange is, once again, centralized, meaning they have total control over the system and report purchases to their federal authorities, per the IRS. The BlockFi exchange is rather limited, however, when it comes to purchasing tokens and only offers a few of the basics.

Crypto-backed Loans

One of the more innovative services that BlockFi offers is its loaning platform. Essentially, you can use crypto assets as collateral to borrow USD. Their loaning platform offers a 50% LTV ratio, meaning you can pull 50% of your crypto value in USD. Their rates can vary, but they offer APRs down to 4.5%.

Personalized Yield

Personalized Yield is an exclusive offering for high net-worth clients on the platform. If you are a part of this program, you get access to crypto lending (essentially yield farming through lending), borrowing with custom LTV and APRs, and discounted trading.

Currently, $3 million is needed to qualify for the BlockFi Personalized Yield program.

How Does BlockFi Make Money?

BlockFi makes money differently, depending on the product. The main money-makers for BlockFi are interest fees (through loans and credit cards), withdrawal fees, trading fees, crypto mining, premiums, and sponsorship fees.

BlockFi Notable Controversies

The most notable controversy for BlockFi began in 2021 when the SEC began looking into their BIA (BlockFi Interest Accounts). The BIAs offered high-interest returns and were advertised as something similar to a savings account but with crypto investments. After the investigation, the SEC fined BlockFi over $100 million for violating the Securities Act of 1933 and the Investment Company Act of 1940. Essentially, the SEC classified the BIAs as securities and investment accounts.

One small controversy occurred in March of 2021 when a promotional giveaway went awry, causing BlockFi to deposit upwards of 700 BTC in some users’ wallets. After threatening legal action and promising other rewards, the matter was cleared up, although it affected less than 100 people total.

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