It appears the BlockFi lending platform may have initially bitten off a little more than it could chew. The company announced the launch earlier this month of new cryptocurrency interest-earning accounts that would pay an annual percentage yield (APY) of 6.2% on an annual monthly interest rate of 6%. However, BlockFi has already updated its rates and things just dropped substantially.
According to the company, certain customers will now receive an APY of just 2%—a considerable difference from what was initially advertised. The new rate applies to all accounts with more than 25 Bitcoin Core (BTC) or Ether (ETH) and goes into effect on April 1.
According to an email sent to CoinDesk from BlockFi CEO Zac Prince, the change was necessary because of the large demand from institutional clients looking to park over $1 million in digital assets. He explained, “We saw a rapid uptick in institutional participation, at sizes that BlockFi and the current crypto borrow market is not able to support at a 6% rate. Generally, large depositors would have a call or meeting with us before depositing and we would tell them not to contribute more than $1 million for the time being. We started to see institutional accounts created followed by deposits well over $1 million, which is not who we think of as our core client and not the type of activity we want at this time. We may create structures to accommodate this type of activity via different vehicles in the future.”
The original post announcing the new accounts mentioned that they were being created with a consumer focus in mind. With the large number of institutional clients looking to come on board, BlockFi asserts that it needed to make adjustments in order to “support as many clients as possible.”
Prince stated that the change won’t be felt by most account holders, adding that only 50 clients—less than 1% of the total—will be impacted.
BlockFi retains a lot of leeway to alter terms, rates and conditions freely. It is built into the terms and conditions of the platform and states that BlockFi can change the rate at its sole discretion.
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