Liquidity issues in the crypto market have forced some of the larger companies in the space to post transparency reports addressing the ongoing crisis. BlockFi, a centralized crypto lender, published its own quarterly transparency report after receiving a much-needed financial injection from FTX.US.
The lender received a $400 million revolving credit facility from the U.S. exchange last month but is yet to draw on it.
In its quarterly report, published on July 22, BlockFi revealed the assets it holds on its platform and how it manages all related liquidity and credit risks.
According to the report, BlockFi currently has $1.8 billion in outstanding loans to borrowers. As the platform doesn’t require all of its borrowers to post collateral, around $600 million worth of those loans are currently uncollateralized.
A total of $1.5 billion in loans has been issued to institutions such as hedge funds, market makers, proprietary trading firms, exchanges, and miners. As all institutional clients undergo a credit due diligence process, BlockFi allows a certain number of them to access loans without posting collateral.
“Whether we require institutional borrowers to post collateral and, if so, the type and level of collateral we require depends on the borrower’s credit profile and the size and composition of the loan portfolio,” the company said.
The remaining $300 million of outstanding loans is made up of retail loans, all of which are overcollateralized. BlockFi said it only allowed its retail clients to borrow funds with a value of up to 50% of their collateral, which is subject to liquidation.
The company announced that it had established a set of guidelines that will enable it to manage liquidity risks and meet its obligations towards institutional and retail borrowing clients. Namely, BlockFi will hold at least 10% of the total amounts due to clients ready to be returned immediately upon demand. At least 50% of the amounts due to clients will be held in inventory or in loans that can be called within seven calendar days. And finally, at least 90% of the total amount due to clients will be held in inventory or loans that can be called back within one year.
BlockFi currently holds approximately $3.9 billion in various digital assets, including stablecoins. Around $2.6 billion of that was transferred to the company through various borrowing agreements, while $1.3 billion was made up of collateral posted by its borrowing clients.
Over a third of the $3.9 billion the company holds is readily accessible and held with third-party custodians and multi-party computation wallets and accounts. However, the company noted that some of these accounts might include assets deployed for hedging activities. Around 4% of those assets have been deployed “as investments” or “for non-custodial staking,” BlockFi said but provided no further details about where the funds were invested.
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