BlockFi, one of the world’s leading firms providing financial services in cryptocurrency has announced they would be pausing withdrawals because of the uncertainty over FTX’s financial situation. The changes at BlockFi highlight rising worries about a spillover effect following the collapse of crypto exchange FTX and trading company Alameda Research.
The company announced the news via Twitter and according to them, activities will be limited on the platform. Customers have also been asked to stop depositing into BlockFi wallet or interest accounts until they are asked to do so. BlockFi also added that “protecting our clients has been and will be our top focus.”
BlockFi revealed that withdrawals would be stopped after having previously tweeted that they would remain open for the 11/11 holiday.
We recognize, given the current market conditions, that this delay is less than ideal.
BlockFi will remain fully operational on 11/11 and all crypto transactions, including withdrawals, will continue as normal.
As always, @BlockFiSupport is available to answer any questions.
— BlockFi (@BlockFi) November 10, 2022
They emphasized that withdrawals including all cryptocurrency transactions will be carried out but it now seems to some users that they were avoiding taking action. BlockFi reported that the platform’s total deployable customer assets totaled US$3.9 billion in its second-quarter report.
The Dealings Between BlockFi and FTX Exchange
BlockFi, a platform for lending cryptocurrencies, is a company that gives its customers the chance to profit from the returns provided by Decentralized Finance (DeFi) protocols.
The company, valued at $4.8 billion in July 2021, was significantly impacted by a liquidity problem with Celsius Network, Voyager Digital, Babel Finance, and CoinFLEX as a result of this year’s catastrophic fall in the cryptocurrency market.
The CEO of BlockFi, Zac Prince announced in July that his company is partnering with FTX. US that was subject to shareholder’s approval so as to cushion the effect of losses experienced during the crypto winter.
Yesterday we signed definitive agreements, subject to shareholder approval, with FTX US for:
1. A $400M revolving credit facility which is subordinate to all client funds, and
2. An option to acquire BlockFi at a variable price of up to $240M based on performance triggers.— Zac Prince (@BlockFiZac) July 1, 2022
The partnership according to him was based on the volatility in the crypto market and the negative impact it had on BlockFi. The deal was for FTX to give a credit of $400 million to BlockFi which is subordinate to all customer’s funds and also a choice to purchase BlockFi for a variable sum of up to $240 million depending on certain performance indicators.
Prince stated that safeguarding client funds is the company’s primary objective. According to him, doing the right thing also helps the market’s health and speeds up the adoption of cryptocurrencies. Therefore FTX U.S is an ideal partner for the business because its technology and offerings complement those of BlockFi very well.
The withdrawal halt from BlockFi is evidence that the lending platforms’ future is uncertain in the short term.
