According to a person with knowledge of the matter, BlockFi Inc. has discontinued its positions as collateral in the Grayscale Bitcoin Trust and ceased accepting shares of the investment fund as collateral. The crypto lender will consider the use of Grayscale again as collateral in the future.
This move shows how the Three Arrows Capital’s collapse and subsequent liquidation continue to send ripples throughout the industry.
Jersey City, the New Jersey-based lender, said in a statement that BlockFi doesn’t hold any positions in GBTC and is winding down “a couple” of loans where GBTC makes up some of the collateral.
“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 has declined to comment.
Grayscale was exposed to the collapse of Three Arrows, which at one point owned more than 5% of the Grayscale Bitcoin Trust. According to BlockFi Chief Executive Officer Zac Prince, BlockFi already suffered about $80 million in losses from Three Arrows’ bad debt, which were absorbed by the company and will be included in the disgraced hedge fund’s ongoing bankruptcy proceedings.
At the end of June, FTX US has agreed to give the crypto lender BlockFi a $400 million revolving credit facility and the option for FTX US to acquire BlockFi for as much as $240 million. BlockFi has been able to maintain operations and has not had to suspend withdrawals, unlike other crypto lenders like Celsius, Babel Finance and Voyager Digital.