BLOCKFI unwound its positions in the Grayscale Bitcoin Trust as collateral and stopped accepting shares of the investment fund as collateral, according to a person with knowledge of the matter. The crypto lender will evaluate the use of Grayscale as collateral in the future.
The move shows how the collapse and subsequent liquidation of crypto hedge fund Three Arrows Capital continues to send shock waves throughout the industry.
BlockFi doesn't hold any positions in GBTC and is winding down "a couple" of loans where GBTC makes up some of the collateral, the Jersey City, New Jersey-based lender said in a statement following publication of the Bloomberg story.
"We are not saying that we won't support GBTC as collateral moving forward," the company said. "Like any collateral, we constantly evaluate appropriate collateral haircut ratios and aim to accept as many types of collateral that our clients hold as possible."
Grayscale Investments LLC declined to comment.
Grayscale had exposure to the collapse of Three Arrows, which at one point owned more than 5 per cent of the Grayscale Bitcoin Trust. BlockFi already suffered about US$80 million in losses from Three Arrows' bad debt, which BlockFi chief executive officer Zac Prince said earlier were absorbed by the company and will be part of the disgraced hedge fund's ongoing bankruptcy case.
BlockFi reached an agreement at the end of June with FTX US that would give the crypto lender a US$400 million revolving credit facility and the option for FTX US to acquire BlockFi for as much as US$240 million. Unlike other crypto lenders like Celsius, Babel Finance and Voyager Digital, BlockFi has been able to maintain operations and has not had to suspend withdrawals. BLOOMBERG