BlockFi announced the launch of the world’s first cryptocurrency-based savings account, on 4 March. This account will allow users to deposit Bitcoin [BTC] and Ethereum [ETH] and earn a massive 6% annual interest rate.
According to BlockFi, a cryptocurrency lending platform, the interest is paid every month in virtual currencies and then compounded to give a 6.2 percent annual percentage yield. However, the savings accounts in question are not newly opened accounts. Instead, these accounts have been in a private beta phase since the start of 2019 and currently hold over $10 million in assets.
BlockFi’s tweet stated,
“Today we are launching the BlockFi interest Account (BIA). Users can securely store Bitcoin or Ether at BlockFi and receive 6% annual interest, paid monthly in cryptocurrency! BIA interest compounds monthly, delivering an industry-leading APY of 6.2%.”
The Twitter thread further revealed that the assets of the account holders will be custodied by Gemini Trust Company, LLC, the cryptocurrency exchange led by the Cameron and Tyler Winklevoss. Gemini is under direct regulation of the New York State Department of Financial Services.
After depositing 25 BTC or ETH, users can commence collecting their interest. This service will be available to the company’s U.S users, except those residing in the states of New York, Washington and Connecticut.
BlockFi further stated that the yield distributed by the accounts will be generated from institutional borrowers. The company stated,
“BlockFi’s proprietary risk management system, which automatically initiates margin calls and liquidations to protect our customers’ assets, has a perfect zero-loss performance record since launching in 2017.”
Zac Prince, the CEO of BlockFi said,
“The launch of BIA is a significant step in BlockFi’s goal of becoming the go-to provider of financial services for crypto investors. We’re excited to leverage our relationships to provide yield on digital assets for crypto investors.”
BlockFi has substantial backing from Crypto-enthusiast Mike Novogratz’s Galaxy Digital which led a $52.5 million fundraising round for the crypto-lending company back in July 2018, a time when BlockFi only offered loans backed by cryptoassets.
Other backers of BlockFi include Susquehanna, Morgan Creek Digital, ConsenSys Ventures, SoFi, Fidelity, Coinbase Ventures and Akuna Capital, among others.
The cryptocurrency community is abuzz following BlockFi’s announcement. Anthony Pompliano, Founder and Managing Partner at Morgan Creek Digital, and a backer of BlockFi tweeted,
@TheRealBlockFi is launching a Bitcoin and Ether deposit account today where you get paid 6% annual interest, compounding monthly, paid in cryptocurrency.
Bringing the HEAT on a Tuesday ”
However, some remain skeptical. @zoinky commented,
“Sounds like a terrible idea. These rarely end well in the bitcoin space. And usually at the worst time for most of the people using it (peaks of markets)”
Another Twitter user, Brett Russell commented,
“Good stuff here Pomp. This is definitely going to excite the #crypto market. A little hesitant in this climate. Maybe full disclosure from you is appropriate and will help (you’re an investor) and that Gemini (Winklevoss) is custodian, can quell the claims of scam.”
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