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Crypto lending platform BlockFi provided crucial insight into its loans, credit, and liquidity position in its “Q2 2022 Transparency Report”.
Centralized crypto lender BlockFi revealed that it ended Q2 2022 with $1.8 billion in outstanding loans. The firm further stated that these loans were from institutional and retail investors. BlockFi also mentioned $600 million in uncollateralized loans as “net exposure.”
BlockFi Q2 Liquidity & Loans Guidelines Announcement
The crypto lender published its Q2 transparency report with a message on Twitter that read:
“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.”
The remaining $1.5 billion of the total loan sum comprised institutional loans. Meanwhile, retail loans constituted $300 million, according to BlockFi’s “Q2 2022 Transparency Report” released Thursday.
BlockFi Liquidity Risk and Loans
BlockFi also outlined its risks relating to risk and credit and how it intends to manage them. Regarding liquidity risks, the crypto lending firm enumerated several active policies going forward. These include retaining in inventory no less than 10% of total amounts due to clients, ready to return the amount to clients. In addition, BlockFi stated it would hold at least 50% of owed funds in places where retrieval would be easy. According to the crypto-focused firm, such places include its inventory or loans that “can be called within seven calendar days”.
Regardless, the crypto lender disclosed that it would hold at least 90% of the total amount owed to clients upon demand. Once more, BlockFi explained that the funds would be in inventory or loans retrievable within one year.
BlockFi Credit Risk
With regards to credit risk, BlockFi’s report read:
“We require many, but not all, borrowers to post varying levels of collateral depending on the borrower’s credit profile and the size of the loan portfolio. As of June 30, 2022, our net exposure was approximately $0.6 billion. We define net exposure as the sum of our net exposures to individual loan counterparties.”
BlockFi further explained that its net exposure to each individual loan counterparty equals the fair value of counterparty loans minus a noticeable stipulation. This omitted stipulation is the “fair value of collateral provided by the counterparty (excluding any amount of the counterparty’s collateral that is in excess of the counterparty’s loans).”
In its Q2 report, BlockFi also based its holdings and outstanding amounts on loans on a Bitcoin (BTC) price of $19,986 as a reference point. The crypto lender also stated that it has established guidelines to maintain the amount of liquidity necessary for all obligations. Such obligations fall under “core business activities,” and include institutional and retail borrowing as well as trading activities.
BlockFi-FTX US Agreement
BlockFi’s new liquidity guidelines arrive a few weeks after the crypto lending platform and crypto exchange FTX.US signed an agreement. This agreement entails transferring $400 million to BlockFi as a credit facility with the option of FTX.US eventually purchasing the firm.