Centralized crypto lender BlockFi disclosed that as of the end of Q2, it had $1.8 billion in outstanding loans from institutional and retail investors and $600 million in “net exposure.”
The disclosure came from its July 21 Transparency Report for Q2 where the firm outlined its risks relating to liquidity and credit, and shared details on its institutional and retail loan portfolios. Of the outstanding loans to borrowers — valued at $1.8 billion — the firm reported that $600 million are uncollateralized loans.
Institutional loans accounted for $1.5 billion of the total outstanding loans, while retail loans made up the remaining $300 million. The firm based its holdings and outstanding loan amounts on a Bitcoin (BTC) price of $19,986 as a reference point.
We’ve just published our Q2 Transparency Report with a breakdown of our total AUM, retail and institutional loans, and how we manage related liquidity and credit risk.https://t.co/qcdRDcYmNQ
— BlockFi (@BlockFi) July 21, 2022
BlockFi said it has established guidelines to help it “maintain the liquidity necessary to meet all our obligations under our core business activities, which includes institutional and retail borrowing and trading activities.”
Those guidelines stipulate that it will hold at least 10% of the total amount due to clients upon demand in inventory, which will be ready to be returned to clients.
It will also hold at least 50% of owed funds in places that can be retrieved and returned to clients within seven days, and will hold at least 90% of the total amounts owed to clients upon demand either in inventory or in loans that can be called back within one year.
The new liquidity guidelines come a few weeks after BlockFi and crypto exchange FTX.US signed an agreement to send $400 million to BlockFi as a “credit facility” with the option to acquire the firm for up to $240 million based on performance triggers.
The deal came together after major crypto investment enterprise Three Arrows Capital reportedly defaulted on its loan from BlockFi.
In a July 20 post outlining its risk management, BlockFi explained that it only provides uncollateralized loans to borrowers it considers “Tier 1” clients. Tier 1 clients are institutional clients who have “a significant capital base, financial statements audited by reputable third parties, and a willingness to be transparent and engaged with” BlockFi.
The clients it considers to be “Tier 2 and Tier 3” clients are not allowed to make uncollateralized loans.