The penetration of Bitcoin in mainstream finance and the rising demand from institutions pushed Fidelity to come with offers of Bitcoin-backed cash loans. BlockFi will handle all the loan disbursement process while Fidelity Digital Assets will hold BTC as collateral in its custody.
Fidelity Digital Assets, the cryptocurrency arm of Fidelity Investments, has decided to roll out cash loans with Bitcoin collateral, in partnership with blockchain startup BlockFi. As per the deal, BlockFi will offer cash that is worth 60% of the loan backed by Bitcoin.
Also, BlockFi will risk-manage the volatile price movements for Bitcoin (BTC). BlockFi Chief Executive Officer Zac Prince said:
“However, the program has room for client-level customization and may be adjusted to meet the needs of large firms”.
Note that Fidelity Digital Assets will only hold Bitcoin (BTC) as collateral and not manage the loan. Last year in 2019, Fidelity Digital Assets launched its Bitcoin custodial services. It is for the first time that Fidelity will allow its coin holdings as collateral. Initially, Fidelity plans to roll out this service only for institutional players. This includes hedge funds, crypto miners, and OTC trading desks.
In the crypto space, Fidelity Digital Assets is trying to bring similar services available to institutions with traditional asset classes. Christine Sandler, head of Sales and Marketing for Fidelity Digital Assets said:
“We continue to see demand for increased capital efficiency from institutions that maintain long bitcoin positions, and with this collateral agent capability, our customers seeking that efficiency can access more opportunity with the capital that they trust us to keep safe”.
“For Fidelity Digital Assets, this is an exciting first step into supporting the thriving lending market for digital assets and deepens our relationships within the digital assets ecosystem with leading firms like BlockFi which allows us to provide even more institutional-grade solutions to investors in this space,” added she.
BlockFi Expands Its Footprint in the Crypto Ecosystem in Partnership with Fidelity
A partnership with a giant like Fidelity puts BlockFi in a prime spot in the crypto space. BlockFi CEO Zac Prince called it an exciting development for the “digital ecosystem”. Crypto-backed cash loans are getting increasingly popular as digital currencies make their way to the mainstream financial markets.
BlockFi has been early in this game starting this service last year in March 2019. The blockchain startup offers loans starting as low as $2000 to $100 million against BTC, ETH, and stablecoins.
Earlier this month, BlockFi formed an important partnership with Visa to offer credit cards with Bitcoin rewards. The rollout of the same will start in January 2021. At every stage of growth, BlockFi has successfully managed to raise funds and has recently raised $50 million from Morgan Creek Digital in August 2020. BlockFi is also planning for an IPO next year during the second half of 2021.
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