BlockFi Interest Account Review – up to 8% on your crypto

BlockFi is a wealth management technology firm servicing crypto investors, offering products such as crypto interest accounts, crypto trading and USD loans backed by crypto.

In this review, we will talk about the BlockFi Interest Account, an interest earning account for your crypto holdings.

The following content contains a non-sponsored review, but may contain affiliate links. For my disclosure policies, please read them here

Introduction to BlockFi

BlockFi was founded in 2017 by Zac Prince and Flori Marquez with the mission of redefining banking to bridge the worlds of traditional finance and blockchain technology.

According to the company, it is the only independent lender with institutional backing from investors that include Valar Ventures, Galaxy Digital, Fidelity, Akuna Capital, SoFi and Coinbase Ventures.

Some of BlockFi investors according to their website

They raised $30 million in Series B funding earlier in February and have offices in New York, New Jersey, Poland, and Argentina.

BlockFi claims that it manages more than US$1 billion in assets on the platform. 

The BlockFi Interest Account

Investors who are long-term positive about cryptocurrencies might want to find ways to monetize their holdings and earn a return while holding them.

The BlockFi Interest Account (BIA) is one of BlockFi’s products that offers competitive interest rates to crypto depositors who store their crypto at BlockFi.

When investors deposit supported crypto holdings with them, they can accrue interest on their crypto and receive interest paid monthly in cryptocurrency of their choice, until they choose to withdraw their funds.

Interest earned with BlockFi compounds monthly, and there is no minimum or maximum deposit for the BlockFi Interest Account. The interest is usually paid on the first week of the following month.

Earn competitive interest rates on your crypto

It is interesting that BlockFi offers eye-popping interest rates to depositors.

Depositors can earn up to 8.6% annually (subject to changes) on their currently supported crypto assets, BTC, ETH, LTC, and stablecoins USDC, GUSD, and PAX.

The current interest rates are as follows –

BlockFi interest rates

Deposit and trade between crypto from the app

Users who want to trade crypto seamlessly can do so with their mobile app, which allows buying, selling and trading of selected cryptocurrencies between BTC, ETH, LTC, USDC, GUSD, and PAX.

To begin, you can start depositing USD (through outbound USD wired transfer) to your BlockFi account, which will be converted to GUSD (Gemini USD – a tokenized version of the USD).

You can then trade between USD stablecoins at 1:1 peg with no trading fees. This means you can trade 1 USD = 1 GUSD = 1 PAX = 1 USDC on BlockFi.

Create recurring trades with BlockFi

BlockFi recently launched recurring trades to give users flexibility and convenience to set automatic trades on a daily, weekly, or monthly basis either via the web platform or mobile app.

Users can only make recurring crypto buys (BTC, ETH, LTC) by selling stablecoins.

Withdrawal Fees and Limits

You can withdraw your deposits at any time, subject to a 24-hour security hold. Withdrawals are then processed by 8pm EST (or 8am SGT) on weekdays subject to their compliance review.

They offer one free withdrawal per client per month, thereafter fees of either 0.25 USD, 0.0025 BTC or 0.0015 ETH apply.

BlockFi sets out withdrawal limits on your deposited holdings to prevent systemic risks.

For example, you can only withdraw 1 million USD stablecoins every 7 days.

What does BlockFi do to your deposited assets?

Similar to how a bank would take in deposits in interest accounts and then lend if out to another party at a higher rate of interest, BlockFi generates interest on your deposits by lending them out to institutional and corporate borrowers on overcollateralized terms – earning an interest on these loans.

Collateralized lending is popular in the lending world even in traditional financial markets, where assets such as properties or securities can be pledged as collateral in return for a loan.

For BlockFi, they offer borrowers a loan-to-value (LTV) of up to 50%, based on their risk modelling. Borrowers will need to deposit crypto assets such as Bitcoin, Ether or Litecoin as collateral to borrow in USD, where it can be used to fund business or lifestyle expenses.

This collateral helps to limit risk and allow the borrowers to obtain funding at good rates without selling assets to raise cash.

Should the borrower’s collateral decrease in value outside of a safe range, bringing the LTV to 70%, a margin call would occur and the client has 3 days to post additional collateral or pay down their loan to bring the LTV back to the safe range.

Once the LTV reaches 80%, BlockFi will liquidate a portion of their collateral to bring the LTV back to a safe zone.

BlockFi Custody and Security

Depositors might be a little bit hesitant to deposit their crypto holdings with BlockFi as they might potentially lose access to their crypto holdings without their private keys.

It’s a legitimate concern, and there’s always a trade-off between the complexities of managing your own keys and centralized firms managing your keys on your behalf in exchange for convenience.

On the custody front, BlockFi stores your assets with their primary custodian, Gemini, at a unique wallet address.

Gemini is a New York trust company licensed by the New York State Department of Financial Services, a fiduciary under the New York Banking Law and held to specific capital reserve requirements and banking compliance standards.

It also has digital asset insurance coverage and is SOC 2 Type 1 security compliant, and is one of the most reputable crypto custodians around.

BlockFi themselves hold lending licenses and money transmitter licenses in several jurisdictions in the United States.

On the security front, there is Face or Touch ID authentication whenever you login into the app. Withdrawals need to be subjected to a one-day security hold before processing, and you can also allow withdrawals to whitelisted addresses only.

What are the biggest risks of BlockFi?

BlockFi is not a traditional financial institution and hence, the traditional consumer protection laws don’t apply.

They are not FDIC insured like a bank account and there is a real possibility of a 100% loss of funds – which explains why the interest you’re getting is quite high.

Apart of platform risks, there are also risks associated with lending, such as borrower default and late repayment, which might result in a loss of capital.

BlockFi tries to mitigate this by lending out to the right kind of borrowers, for example, high quality institutional borrowers such as investment funds and OTC market makers with strong creditworthiness and financial health – ensuring the more reliable and stream of interest income for lenders.

Performance during March 2020 sell off

According to BlockFi, there were violent downward price movements in the cryptocurrency market resulting in very limited liquidity in March 2020, and their risk management systems did not liquidate USD loan client collateral below a price of ~$4,500, despite the market reaching lows of ~$3,800.

There were also large volumes of deposits and withdrawals during that period, but they managed to maintain their operational processing SLA without downtime.

Data breach

BlockFi suffered a data breach in May 2020, where some client information was exposed for a brief period through a BlockFi employee’s phone via a SIM-swap attack – user funds however, were also not affected.

Since then, it has hired a new Chief Security Officer as it continues to strengthen its security functions.

Overall thoughts

If you own crypto, BlockFi makes your idle crypto work for you by lending them out to high quality institutions for a return.

Watch their co-founder Flori Marquez address some common concerns on YouTube:

If you don’t want to manage wallet keys, just not into the whole DeFi craze or just want to compound your crypto or stablecoin earnings, give BlockFi a try – you might grow to like them.

Sign up with BlockFi and get up to US$250 crypto bonus in BTC.

Spiderscore

Spiderscore
8 10 0 1
BlockFi is a great way to earn a nice interest annually on crypto holdings, especially on stablecoins where your risks of fluctuations is kept to the minimal. However, risks exist and users should be aware of all the risks of storing crypto on their platform.
BlockFi is a great way to earn a nice interest annually on crypto holdings, especially on stablecoins where your risks of fluctuations is kept to the minimal. However, risks exist and users should be aware of all the risks of storing crypto on their platform.
8/10
Total Score iSpiderscore is our ranking system used when reviewing products and services. It is based on a scale of 1 to 10, with 10 being the most highly recommended rating.

Pros

  • Earn high yields on stablecoins and crypto
  • User friendly app and web interface
  • Recurring trades to buy crypto
  • USD wire transfer in to get started
  • Free withdrawals once a month

Cons

  • High risk, high reward - potential to lose 100% of your funds
  • Funds not regulatory backed or insured
  • Not your keys, not your crypto
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15 comments
  1. Hi Derrick, a few questions:

    1. Was reading this article right after your most recent review on Gemini. Say I have BTC on Gemini, am I able to convert BTC to USDC on Gemini and then transfer this USDC to Blockfi? Or do I have to transfer my BTC from Gemini to Blockfi and then convert it to USDC? Or is the only way to obtain USDC via the method you mentioned above, i.e. deposit USD to BlockFi, convert it to GUSD, exchange it for USDC?

    2. Following from the above, related to the third option, how do I deposit USD to BlockFi? Say I have USD in my stanchart account, am I able to just transfer it via FAST or something?

    3. Last but not least, you mentioned: When investors deposit supported crypto holdings with them, they can accrue interest on their crypto and receive interest paid monthly in cryptocurrency of their choice, until they choose to withdraw their funds. If the interest is paid in cryptocurrency, how do I convert it back to fiat? Would it just be the reverse of the third option above i.e. “deposit USD to BlockFi, convert it to GUSD, exchange it for USDC”?

    Apologies for the noob question. Happy New Year! 🙂

    DS

    1. Hello DS,

      Happy new year! Gemini doesn’t have a BTC/USDC pair on their exchange as USDC is a stablecoin issued by Circle. Instead, you can convert BTC into GUSD (Gemini Dollar) on Gemini then send GUSD into BlockFi. BlockFi has 1:1 conversion between stablecoins except USDT so you can convert your GUSD to USDC on BlockFi without fees.

      2. If you wish to transfer USD into BlockFi (automatically converted to USDC) you need to initiate an international USD transfer – not FAST since FAST is for Singapore only. StanChart has such an option using LiveFX so fees are not really that expensive.

      3. To convert interest in stablecoins back to fiat you can either deposit GUSD into Gemini and withdraw or through crypto.com. Withdrawing to fiat is more difficult since regulators need a way to verify the source of funds.

      1. Hi Derrick,

        Thanks for taking the time to reply! Much appreciated! 🙂

        Was thinking, if my aim is just to earn abit kopi money via these CeFi Interest Rates (e.g. BlockFi or Nexo), since CoinHako allows me to purchase USDC with SGD, would it be possible to purchase USDC on CoinHako and then transfer this USDC to BlockFi or Nexo? How would I go about this transfer?

        DS

        1. Does Coinhako allow USDC purchases? I don’t think they do. Even if they do, I personally don’t like this route because Coinhako has transaction fees of close to 1% and if you DCA into this for 8.6% annual CeFi yields it takes at least 1.5 months to breakeven on that spread. Instead, if you’re using BlockFi, what I do is an international transfer (via DBS or SC) direct into your BlockFi USD account which gets automatically converted into USDC. Anyway, once you have USDC you can withdraw anywhere to any other platforms via the Ethereum blockchain with the destination address.

  2. yo derrick. paiseh. retyping this as i think my previous comment probably did not get through. so just to sum up (and correct me if i’m wrong):

    1. transfer usd from sc to blockfi. this gets converted to usdc
    2. subsequently, to convert this back to fiat, transfer usdc to gemini.
    3. convert usdc to gusd (can I convert usdc to gusd in blockfi? or can it only be done on gemini?)
    4. withdraw as fiat

    thanks in advance! 🙂

    DS

    1. Hi DS!

      1. is correct

      To withdraw, you need to deposit GUSD (can be converted in BlockFi 1:1 with USDC without fees) into Gemini (withdraw as USD fiat in this case). Otherwise, can use any fiat off ramps like Gemini/Crypto.com/Coinhako to sell supported crypto (e.g. BTC, ETH…) into SGD and send it to Xfers for bank withdrawal.

      1. wa derrick shifu. paiseh man. yet another question.

        in this context of earning interest on gusd/usdc, what would be the cheapest way to go about maintaining these two accounts (i.e. gemini and blockfi)? i saw that gemini has a custody fee among others. no idea if the rest applies for this context! and for blockfi, i don’t really understand the wording for their fee schedule lol: “All BIA clients are entitled to one free crypto withdrawal per calendar month and one free stablecoin withdrawal per month. Each free withdrawal can only be applied to one currency each month. For each subsequent withdrawal request within that month, applicable withdrawal fees will be applied.” say we take gusd, does 1 stablecoin refer to USD1.32? so if I were to transfer 1000 gusd from blockfi to gemini, i will incur a fee of USD0.25? I assume the fee of USD0.25 is levied on the remaining 999 gusd and not 999 x USD0.25 hor? haha!

        hence because gemini lists a whole slew of fees and i’m not sure which applies, would it be better to do what you mentioned above (deposit usd into blockfi –> convert usdc into gusd –> transfer to gemini for withdrawal) or deposit usd into gemini –> transfer gusd to blockfi –> transfer to gemini for fiat withdrawal?

        Thanks in advance man!!!

        1. Hello again! Gemini has no custody fee unless you’re using their Custody product (cold storage). If you want to earn interest (through BlockFi’s lending), you can withdraw to BlockFi – free from Gemini and free deposits for BlockFi. For BlockFi, they have 1 free stablecoin (USDC/GUSD/PAX) withdrawal per month, and thereafter stablecoin withdrawals cost $0.25 per withdrawal (you’ll receive 999.75 when withdrawing 1000 USD) . There’s also a 1 day security hold for BlockFi withdrawals.

          The biggest fee you should be concerned with on Gemini is the trading fees (~1%), but trades on BlockFi also has a build-in trading fee (1%) reflected in the prices. If you want the lowest fees for trading, consider Binance – USD into BlockFi > withdraw USDC to Binance > Buy crypto with USDC > withdraw to BlockFi – but it’s a little inconvenient.

          1. thanks man for taking the time to answer my queries! grateful much!

            paiseh, think you may have missed my earlier query: as singaporeans do we have to pay tax on the interest we earn at blockfi? (or was this answered when you said “free deposits for BlockFi”?)

            haha do you mean 998.75? i.e. if i withdraw 1000 usdc/gusd from blockfi, since the first 1 usdc/gusd is free, the remainder would be 999 usdc/gusd – USD0.25 = 998.75usdc/gusd, correct?

          2. No as singaporeans we don’t – although in future it might change, it’s more applicable for US residents (taxed on global income).

            It’s free withdrawal for the first withdrawal (any amount) so it’s still 999.75 🙂

  3. thanks man!

    btw paiseh i just caught/thought of this. you mentioned in one of your replies above:

    “Otherwise, can use any fiat off ramps like Gemini/Crypto.com/Coinhako to sell supported crypto (e.g. BTC, ETH…) into SGD and send it to Xfers for bank withdrawal.”

    with regard to converting my gusd in gemini into fiat USD and then withdrawing, is it possible to just transfer this fiat USD back to stanchart or do I need to set up a xfers account?

  4. Is it possible to transfer some bitcoin that is already in coinhako account to Blockfi (to earn some interest) using the Blockfi Bitcoin Wallet Address that is in QR code?

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