BlockFi takes compliance seriously. We believe it’s important for our industry to move forward with a positive and cooperative relationship with regulators. We realize that although it would be easier just to offer USD loans back by Bitcoin or Ether and remove third and fourth party involvement, we understand the necessity for a regulatory framework for the blockchain sector and intend to play a role in that process.
In the U.S., lending is regulated on the state level for non-banks and fintech companies.* This regulation is similar to the MSB state-by-state approach used by crypto exchanges. As we set out to serve customers across the U.S., we had to do quite a bit of legal work to determine which states required a lending license and which ones didn’t. With our current product, we can lend in 39 states (including Florida, New Jersey and New York) without a license. This is due to our 12% interest rate, which is below the established rate for needing a lending license in these states. Other cryptoasset lenders with higher USD borrowing rates may have a much more limited geographic coverage than BlockFi.
What about the other 11 states where we needed a license to lend?
Since BlockFi launched, our team has been working closely with various regulatory agencies in an effort to legalize crypto-backed lending across the U.S. This has been a challenging process as many lending agencies aren’t familiar with cryptocurrencies or blockchain technology. In fact, the first feedback we got from regulators was, “What is a fiat currency?” We’ve been taking the time to explain to regulators how our process works, so that we can reach more people in need of our products. As a result, we have received licenses to offer loans backed by crypto in four states:
The benefit of working with a cryptoasset lender located and regulated within the U.S. is that your assets are protected by U.S. law. You can rest easy knowing that BlockFi is backed by institutional investors and operating in a fully compliant manner.
We think of ourselves as the bridge between traditional finance and the blockchain ecosystem. BlockFi will continue to forge the path for broadscale cryptocurrency adoption across the U.S. and around the world. We hope that our efforts will encourage wider adoption of cryptocurrencies and greater access to low-cost credit for consumers and businesses. We’re already getting positive feedback from our early clients, who are using BlockFi loans to purchase real estate, start businesses, optimize their tax exposure, and most importantly - hold onto their crypto!
*Exceptions exist for national banks.
--The BlockFi Team 💙
(image created by freepik)