Is BlockFi Safe and Legit?

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As an investor, you are well aware that investing is a risky art. One day you can be making a lot of money and the next, part of your portfolio might get wiped out. However, if you still want to invest in crypto, one of the most popular ways to do this is through BlockFi.

BlockFi offers high-interest savings accounts where you can deposit your crypto holdings and earn interest overtime. For this reason, BlockFi has earned the title “crypto-titan.” However, despite their sweet offerings, is BlockFi a safe and legitimate platform to use? Let’s find out.

What Is BlockFi?

BlockFi is a cryptocurrency exchange platform based in New-Jersey, founded in 2017 by Flori Marquez and Zac Prince, that goes beyond just trading. It was & offers one of the most popular products in the market; crypto interest accounts. It also offers crypto-backed cash loans. Investors take advantage of these interest accounts to earn interest on their digital assets.

Opening an interest account on BlockFi is absolutely free. There is also no limit to the amount of cryptocurrency that you can deposit into your account. There’s no holding period limitation for earning interest. You can simply deposit your crypto today and start earning interest as soon as possible.  

BlockFi works by facilitating borrowing & lending. Investors simply deposit their assets on the platform to earn interest. BlockFi then lends these assets out to borrowers. Borrowers that BlockFi lends out to include; traders and investment funds, OTC market makers, and businesses in need of crypto liquidity. These investors in turn pay interest on their borrowed funds.

BlockFi Exchange Safety

BlockFi is considered every bit as safe as its primary custodian Gemini. It stores 95% of its crypto holdings in cold storages scattered around geographically. The remaining 5% of crypto is stored in hot wallets that are insured by Aon. Not to mention, Gemini, their custodian, obtains their license from the New York State Department.

BlockFi interest accounts (BIAs) are not FDIC or SIPC-insured. Therefore, they are less safe compared to money stored in banks. BlockFi is aware of this shortcoming and has taken additional steps to ensure the safety of assets.

One of the ways that BlockFi does this is through collateralization. This means that borrowers can only borrow up to 50% of their overall collateral. This ensures that there is no shortage of assets on the platform and that lenders can access & withdraw their holdings at any given time.

So far, there have not been any issues of users losing money on the platform through hacks or any other security compromise.  

BlockFi Lending Safety

When it comes to lending, BlockFi has a top-tier risk management process. Once a user sends their crypto to BlockFi, it immediately gets sent to one of their regulated custodians. From there, the crypto is then lent out to a vetted institutional borrower who uses the assets to execute trading strategies or hedge their position.

BlockFi ensures that it lends to multiple institutions to ensure that it diversifies and minimizes the risk of loss. Additionally, a sizable amount of the collateral is held aside so that clients can withdraw their funds at any given time. Borrowers can deposit collateral in the form of assets, digital assets, or cash.

Additionally, BlockFi requires that the majority of their borrowers deposit different levels of collateral depending on their credit profile and loan portfolio size. All clients undergo a credit due diligence process to determine their credit limits. Institutional borrowers are able to access digital assets through a negotiated loan agreement. Interest on these loans is often fixed with the average term being under a year. Interest on the loans is typically payable on a monthly basis, with the principal due at maturity.

BlockFi also has an internal credit lending policy that limits exposure to one borrower. Loan approvals follow an internal credit limit matrix that’s based on the borrower’s:

  • Financial information
  • Financial size
  • Business model
  • Country or origin/domicile
  • Leverage
  • Other credit measures.

Lastly, given that digital assets are highly volatile, all collateral provided by clients is subject to margin calls. If the value of a digital asset drops significantly, a margin call will be made to the client. If the client doesn’t respond, a portion of the collateral gets liquidated. The outstanding loan amount is also reduced.

BlockFi Credit Card Safety

The BlockFi credit card comes built-in with Visa purchase alerts. This means that you can actively keep track of your card spending. In case your card gets stolen or lost, you can simply report it to BlockFi & order a replacement card any time.

You can do this by logging into your account via we and navigating to the “Credit Card” section. From there, select “Manage Card” & then click on the “Replace Card” tab. Alternatively, you can call BlockFi through their official customer support number located on the back of the card. A customer service representative will assist you in reporting your card as stolen and help you get a replacement card after confirming your address.

You can also call them in case there are unauthorized transactions on your card. With that said, here are a few recommendations by BlockFi to keep your card safe:

  • Don’t enroll for the card via third-party services. Only use the official BlockFi website to enroll.
  • Never disclose your 16-digit card number, your social security number, or the security code. BlockFi will never ask for these details as well. The only time that BlockFi will ask for your 16-digit card number is during activation, which will be done through an automated system.
  • Don’t send any images of the card to anyone. BlockFi will never request you to do this.
  • The safest way to discuss any credit card related issues is through a call to the official BlockFi customer service number located on the back of the card.

BlockFi Loans Safety

BlockFi has a number of protections set out when it comes to loans and collaterals. The first protection that you have under BlockFi is the Loan and Security Agreement. It outlines BlockFi’s obligations to return the collateral once the loan is paid in full.

BlockFi operates under Article 9 of the Uniform Commercial Code. This code governs secured lending and files a UCC-1 with whichever state you reside in. Additionally, it collaborates with a 3rd party loan servicer that guarantees the seamless execution of loans, especially for US clients. It also receives institutional backing from a number of investors and quality custody partners.

BlockFi doesn’t do a hard-pull or soft-pull on your credit score. As reiterated before, BlockFi lends only based on an internal credit process to determine your ability to pay back the loan. Therefore, no credit checks translate to no changes to your credit score.

With that said, you should be aware that crypto you use as collateral for your loan does not earn any interest. BIAs (BlockFi Interest Accounts) are considered separate from crypto-backed loans. Therefore, your crypto-collateral will definitely earn no interest. Your loan, on the other hand, will.

BlockFi Regulation

BlockFi does things a little differently than most companies within the same industry. For starters, BlockFi takes a compliance-ready approach when it comes to regulation. BlockFi is US-regulated.

Since the company resides in the US, it falls under the jurisdiction of the United States government. Therefore, it’s regulated under US law. With that said, On March 4th, 2019, the SEC (Securities & Exchange Commission) found out that BlockFi was offering securities through its BIA accounts.

Additionally, the SEC found out that BlockFi had not registered its security offers & operated for a period of more than 18 months as an unregistered investment company. BlockFi was charged with violating the registration provisions of the Investment Company Act of 1940. The penalty for this was a whopping $50 million penalty, which BlockFi agreed to pay.

Since then, BlockFi discontinued the operations of BIAs in the US and attempted to bring its business within the provisions of the Company Act. US clients who already had BIAs will continue to earn interest on their assets. However, they cannot add any new assets to their accounts. Non-US citizens were unaffected by these changes.

Later, BlockFi announced plans to register under the Securities Act of 1933 & unveil a new product; BlockFi Yields. BlockFi Yield is set to be the first SEC-registered interest earning security. Once the SEC declares BlockFi Yield registration successful, all US BIAs will be exchanged to BlockFi Yield accounts.

BlockFi also agreed to pay an additional $50 million to 32 states to settle similar charges. At the moment, BlockFi is working closely with regulators to ensure the continuity of its business and service to customers.

BlockFi Team & Investors

BlockFi’s team comprises a selection of experienced and skilled employees pulled from a number of different sectors. These sectors include finance, startup culture, and technology. Since inception, the company has grown to employ over 1,000 employees across international borders.

At the top of the list are founders Zac Prince & Flori Marquez who operate as CEO & SVP of operations respectively. Today, BlockFi has offices in New York, New Jersey, Argentina, & Poland & seeks to continue adding to their global roster of highly-accomplished staff.

If you want more information regarding the BlockFi team, be sure to check out their Leadership Team page or their LinkedIn page.

BlockFi has also secured the backing of several renowned investors who believe in the BlockFi mission. These investors include but are not limited to:

  • Bain Capital Ventures
  • Pomp Investments
  • Tiger Global
  • Valar Ventures
  • Purple Arch Ventures
  • HashKey
  • Kenetic Capital
  • Avon Ventures
  • Morgan Creek Capital, etc.

So, How Secure is BlockFi?

BlockFi passes the security test. Apart from never losing any money to hackers or through any other means, BlockFi enjoys a positive attitude across the internet. Not to mention, BlockFi’s official custodian is Gemini, who is considered to be very secure.

Second, BlockFi uses state-of-the art security measures. Over 95% of their digital assets are held in cold storage facilities scattered geographically. Additionally, the remaining 5% are held in hot wallets insured by Aon.

While the firm is definitely not FDIC-insured, it makes up for it through collateralization. Additionally, the company is fully-compliant and regulated by the US SEC.

As you can see, BlockFi considers security as their top priority. Not to mention, they keep updating & hardening their security protocols to ensure that they can beat sophisticated threats. To answer the question, “How secure is BlockFi?” BlockFi is very secure.

FAQs

Is BlockFi Safer than Coinbase?

Although BlockFi uses state-of-the-art security measures, it is not FDIC-insured. Coinbase, on the other hand, is FDIC-insured. This means that users with large crypto deposits are much safer on Coinbase than BlockFi, especially if they are hacked.

Is BlockFi Safer than Celsius?

Both Celsius and BlockFi seem to offer the same thing; crypto-backed loans & high yielding interest accounts. When it comes to security, both platforms seem to offer a lot of security features. For starters, they both have 2 FA. They both temporarily hold your assets for 7 days in case your account gets hacked. Both platforms are comparably secure.  

Can BlockFi be Trusted?

BlockFi can definitely be trusted. First & foremost, BlockFi is US SEC regulated and complies with all regulations set forth by the commission. Second, BlockFi receives backing from a number of renowned institutional investors. Last, BlockFi has never lost any user funds through the platform or any other way. BlockFi can be trusted.

Is BlockFi in Trouble from the SEC?

BlockFi is no longer in trouble with the SEC. It had a minor run-in with the SEC in March, 2019 but has since resolved this issue. At the moment, BlockFi is working with the SEC to introduce a new BlockFi product; BlockFi Yield.

Is BlockFi GUSD Safe to Use?

Gemini Dollar, otherwise known as GUSD, is perfectly safe to use. BlockFi offers GUSD as a USD loan funding option and as collateral from borrowers. Additionally, GUSD poses a great opportunity for investors to access the crypto ecosystem minus the exposure to volatile cryptocurrencies. The only downside is that GUSD is only limited to non-US users.

How Legit is BlockFi?

BlockFi is very legitimate. BlockFi is planning to register under the Securities Act of 1933 & release the first SEC-backed interest security in the world which means that it is US-regulated. On top of that, BlockFi has an amazing pool of talent along with a top-tier risk management process. It’s also backed up by the biggest names in the industry. BlockFi is very legitimate.

Written by
Ayush Pande

As an investor, you are well aware that investing is a risky art. One day you can be making a lot of money and the next, part of your portfolio might get wiped out. However, if you still want to invest in crypto, one of the most popular ways to do this is through BlockFi.

BlockFi offers high-interest savings accounts where you can deposit your crypto holdings and earn interest overtime. For this reason, BlockFi has earned the title “crypto-titan.” However, despite their sweet offerings, is BlockFi a safe and legitimate platform to use? Let’s find out.

What Is BlockFi?

BlockFi is a cryptocurrency exchange platform based in New-Jersey, founded in 2017 by Flori Marquez and Zac Prince, that goes beyond just trading. It was & offers one of the most popular products in the market; crypto interest accounts. It also offers crypto-backed cash loans. Investors take advantage of these interest accounts to earn interest on their digital assets.

Opening an interest account on BlockFi is absolutely free. There is also no limit to the amount of cryptocurrency that you can deposit into your account. There’s no holding period limitation for earning interest. You can simply deposit your crypto today and start earning interest as soon as possible.  

BlockFi works by facilitating borrowing & lending. Investors simply deposit their assets on the platform to earn interest. BlockFi then lends these assets out to borrowers. Borrowers that BlockFi lends out to include; traders and investment funds, OTC market makers, and businesses in need of crypto liquidity. These investors in turn pay interest on their borrowed funds.

BlockFi Exchange Safety

BlockFi is considered every bit as safe as its primary custodian Gemini. It stores 95% of its crypto holdings in cold storages scattered around geographically. The remaining 5% of crypto is stored in hot wallets that are insured by Aon. Not to mention, Gemini, their custodian, obtains their license from the New York State Department.

BlockFi interest accounts (BIAs) are not FDIC or SIPC-insured. Therefore, they are less safe compared to money stored in banks. BlockFi is aware of this shortcoming and has taken additional steps to ensure the safety of assets.

One of the ways that BlockFi does this is through collateralization. This means that borrowers can only borrow up to 50% of their overall collateral. This ensures that there is no shortage of assets on the platform and that lenders can access & withdraw their holdings at any given time.

So far, there have not been any issues of users losing money on the platform through hacks or any other security compromise.  

BlockFi Lending Safety

When it comes to lending, BlockFi has a top-tier risk management process. Once a user sends their crypto to BlockFi, it immediately gets sent to one of their regulated custodians. From there, the crypto is then lent out to a vetted institutional borrower who uses the assets to execute trading strategies or hedge their position.

BlockFi ensures that it lends to multiple institutions to ensure that it diversifies and minimizes the risk of loss. Additionally, a sizable amount of the collateral is held aside so that clients can withdraw their funds at any given time. Borrowers can deposit collateral in the form of assets, digital assets, or cash.

Additionally, BlockFi requires that the majority of their borrowers deposit different levels of collateral depending on their credit profile and loan portfolio size. All clients undergo a credit due diligence process to determine their credit limits. Institutional borrowers are able to access digital assets through a negotiated loan agreement. Interest on these loans is often fixed with the average term being under a year. Interest on the loans is typically payable on a monthly basis, with the principal due at maturity.

BlockFi also has an internal credit lending policy that limits exposure to one borrower. Loan approvals follow an internal credit limit matrix that’s based on the borrower’s:

  • Financial information
  • Financial size
  • Business model
  • Country or origin/domicile
  • Leverage
  • Other credit measures.

Lastly, given that digital assets are highly volatile, all collateral provided by clients is subject to margin calls. If the value of a digital asset drops significantly, a margin call will be made to the client. If the client doesn’t respond, a portion of the collateral gets liquidated. The outstanding loan amount is also reduced.

BlockFi Credit Card Safety

The BlockFi credit card comes built-in with Visa purchase alerts. This means that you can actively keep track of your card spending. In case your card gets stolen or lost, you can simply report it to BlockFi & order a replacement card any time.

You can do this by logging into your account via we and navigating to the “Credit Card” section. From there, select “Manage Card” & then click on the “Replace Card” tab. Alternatively, you can call BlockFi through their official customer support number located on the back of the card. A customer service representative will assist you in reporting your card as stolen and help you get a replacement card after confirming your address.

You can also call them in case there are unauthorized transactions on your card. With that said, here are a few recommendations by BlockFi to keep your card safe:

  • Don’t enroll for the card via third-party services. Only use the official BlockFi website to enroll.
  • Never disclose your 16-digit card number, your social security number, or the security code. BlockFi will never ask for these details as well. The only time that BlockFi will ask for your 16-digit card number is during activation, which will be done through an automated system.
  • Don’t send any images of the card to anyone. BlockFi will never request you to do this.
  • The safest way to discuss any credit card related issues is through a call to the official BlockFi customer service number located on the back of the card.

BlockFi Loans Safety

BlockFi has a number of protections set out when it comes to loans and collaterals. The first protection that you have under BlockFi is the Loan and Security Agreement. It outlines BlockFi’s obligations to return the collateral once the loan is paid in full.

BlockFi operates under Article 9 of the Uniform Commercial Code. This code governs secured lending and files a UCC-1 with whichever state you reside in. Additionally, it collaborates with a 3rd party loan servicer that guarantees the seamless execution of loans, especially for US clients. It also receives institutional backing from a number of investors and quality custody partners.

BlockFi doesn’t do a hard-pull or soft-pull on your credit score. As reiterated before, BlockFi lends only based on an internal credit process to determine your ability to pay back the loan. Therefore, no credit checks translate to no changes to your credit score.

With that said, you should be aware that crypto you use as collateral for your loan does not earn any interest. BIAs (BlockFi Interest Accounts) are considered separate from crypto-backed loans. Therefore, your crypto-collateral will definitely earn no interest. Your loan, on the other hand, will.

BlockFi Regulation

BlockFi does things a little differently than most companies within the same industry. For starters, BlockFi takes a compliance-ready approach when it comes to regulation. BlockFi is US-regulated.

Since the company resides in the US, it falls under the jurisdiction of the United States government. Therefore, it’s regulated under US law. With that said, On March 4th, 2019, the SEC (Securities & Exchange Commission) found out that BlockFi was offering securities through its BIA accounts.

Additionally, the SEC found out that BlockFi had not registered its security offers & operated for a period of more than 18 months as an unregistered investment company. BlockFi was charged with violating the registration provisions of the Investment Company Act of 1940. The penalty for this was a whopping $50 million penalty, which BlockFi agreed to pay.

Since then, BlockFi discontinued the operations of BIAs in the US and attempted to bring its business within the provisions of the Company Act. US clients who already had BIAs will continue to earn interest on their assets. However, they cannot add any new assets to their accounts. Non-US citizens were unaffected by these changes.

Later, BlockFi announced plans to register under the Securities Act of 1933 & unveil a new product; BlockFi Yields. BlockFi Yield is set to be the first SEC-registered interest earning security. Once the SEC declares BlockFi Yield registration successful, all US BIAs will be exchanged to BlockFi Yield accounts.

BlockFi also agreed to pay an additional $50 million to 32 states to settle similar charges. At the moment, BlockFi is working closely with regulators to ensure the continuity of its business and service to customers.

BlockFi Team & Investors

BlockFi’s team comprises a selection of experienced and skilled employees pulled from a number of different sectors. These sectors include finance, startup culture, and technology. Since inception, the company has grown to employ over 1,000 employees across international borders.

At the top of the list are founders Zac Prince & Flori Marquez who operate as CEO & SVP of operations respectively. Today, BlockFi has offices in New York, New Jersey, Argentina, & Poland & seeks to continue adding to their global roster of highly-accomplished staff.

If you want more information regarding the BlockFi team, be sure to check out their Leadership Team page or their LinkedIn page.

BlockFi has also secured the backing of several renowned investors who believe in the BlockFi mission. These investors include but are not limited to:

  • Bain Capital Ventures
  • Pomp Investments
  • Tiger Global
  • Valar Ventures
  • Purple Arch Ventures
  • HashKey
  • Kenetic Capital
  • Avon Ventures
  • Morgan Creek Capital, etc.

So, How Secure is BlockFi?

BlockFi passes the security test. Apart from never losing any money to hackers or through any other means, BlockFi enjoys a positive attitude across the internet. Not to mention, BlockFi’s official custodian is Gemini, who is considered to be very secure.

Second, BlockFi uses state-of-the art security measures. Over 95% of their digital assets are held in cold storage facilities scattered geographically. Additionally, the remaining 5% are held in hot wallets insured by Aon.

While the firm is definitely not FDIC-insured, it makes up for it through collateralization. Additionally, the company is fully-compliant and regulated by the US SEC.

As you can see, BlockFi considers security as their top priority. Not to mention, they keep updating & hardening their security protocols to ensure that they can beat sophisticated threats. To answer the question, “How secure is BlockFi?” BlockFi is very secure.

FAQs

Is BlockFi Safer than Coinbase?

Although BlockFi uses state-of-the-art security measures, it is not FDIC-insured. Coinbase, on the other hand, is FDIC-insured. This means that users with large crypto deposits are much safer on Coinbase than BlockFi, especially if they are hacked.

Is BlockFi Safer than Celsius?

Both Celsius and BlockFi seem to offer the same thing; crypto-backed loans & high yielding interest accounts. When it comes to security, both platforms seem to offer a lot of security features. For starters, they both have 2 FA. They both temporarily hold your assets for 7 days in case your account gets hacked. Both platforms are comparably secure.  

Can BlockFi be Trusted?

BlockFi can definitely be trusted. First & foremost, BlockFi is US SEC regulated and complies with all regulations set forth by the commission. Second, BlockFi receives backing from a number of renowned institutional investors. Last, BlockFi has never lost any user funds through the platform or any other way. BlockFi can be trusted.

Is BlockFi in Trouble from the SEC?

BlockFi is no longer in trouble with the SEC. It had a minor run-in with the SEC in March, 2019 but has since resolved this issue. At the moment, BlockFi is working with the SEC to introduce a new BlockFi product; BlockFi Yield.

Is BlockFi GUSD Safe to Use?

Gemini Dollar, otherwise known as GUSD, is perfectly safe to use. BlockFi offers GUSD as a USD loan funding option and as collateral from borrowers. Additionally, GUSD poses a great opportunity for investors to access the crypto ecosystem minus the exposure to volatile cryptocurrencies. The only downside is that GUSD is only limited to non-US users.

How Legit is BlockFi?

BlockFi is very legitimate. BlockFi is planning to register under the Securities Act of 1933 & release the first SEC-backed interest security in the world which means that it is US-regulated. On top of that, BlockFi has an amazing pool of talent along with a top-tier risk management process. It’s also backed up by the biggest names in the industry. BlockFi is very legitimate.

Written by
Ayush Pande