Collateralization of cryptocurrency assets benefits retail borrowers by allowing them to hold onto their crypto assets rather than selling them in order to make large purchases, like buying a car. They can also save on taxes by borrowing against crypto assets versus selling them. Corporate and institutional borrowers realize similar benefits as well as some others, including access to fiat liquidity to support day-to-day business operations, third-party verification and auditing of crypto asset holdings, and the ability to make large crypto-backed investments in other markets.BlockFi takes cryptocurrency as collateral, offering interest rates on loans of around 12 percent. This is generally lower than unsecured loans and higher than loans secured with traditional assets such as securities or real estate.BlockFi’s founding story starts with CEO Zac Prince’s experience working with a bank in Texas to get a mortgage. He had taken out an earlier loan with the same bank before he started to invest in cryptocurrencies. On his second loan application, in mid-2017, he included bitcoin and ether among his assets. The bank had never heard of bitcoin before and almost stopped working with him when they googled “bitcoin” and learned that “Bitcoin is mainly used by money launderers and drug dealers.” It was then that Prince saw an opportunity to provide a lending product to serve the borrowing needs of cryptocurrency holders and started to develop a plan for what would become BlockFi.Prince and Flori Marquez founded BlockFi in New York City, securing $1.55 million in seed funding on February 13, 2018, from strategic partners ConsenSys Ventures, Kenetic Capital, PJC, SoFi, Purple Arch Ventures and Lumenary. Prince summarized BlockFi’s partnerships, telling Bitcoin Magazine, “We were fortunate to have a strong interest in our seed round and are excited about the strategic value that our investor base adds to our efforts. ConsenSys provides connectivity to the ecosystem via the ConsenSys mesh that BlockFi will leverage in building out our platform. Kenetic Capital is based in Hong Kong and will be valuable as we consider raising capital and expanding into Asian markets. PJC has deep experience and a strong network of regulators. SoFi is the largest and most successful online lender and will provide strategic guidance on capital markets and product development. Purple Arch is part of the Ivy League venture network and has a strong community of professionals. Lumenary is a service provider and investor in BlockFi — they provide branding, design and other marketing services.”BlockFi will announce additional funding in Q2, which will primarily be used for funding loans, with a Series A equity raise expected in the second half of 2018.BlockFi is a
